Orange County Real Estate

Orange County Housing Report 7/25/2011

2011-07-26T09:46:00.000-07:00

Orange County Housing Report: A 2011 Midyear OC Housing Update

July 21, 2011

Good Afternoon!

Not a lot is changing in regards to the Orange County housing market, but it looks as if the second half is poised to be better than a year ago. So, how’s 2011 shaping up thus far and where is housing headed from here? Let’s dig a little bit deeper...

Demand: no tax credit this year, but demand is much more predictable and following a normal cyclical pattern.
This is the first time since 2008 where demand has been able to function on its own without an $8,000 first time home buyer tax credit to skew the numbers. In 2009, the credit expired on November 30th. From April 2009 through November 2009, demand remained well above the 3,000 pending sale threshold, enabling 2009 to be the best year in total sales since 2005, prior to the beginning of the current downturn. In 2010, in order to take advantage of the tax credit, a home had to be pending by April 30th. The market sizzled for the first four months of the year, but dropped considerably after the pending sale deadline. The second half of 2010, with no tax credit, demand was off by 8% compared to 2009. Through today, demand is off by 10% compared to last year. Closed sales are off by 10% as well. Naysayers who have followed this housing report have often pointed to the fact that pending sales are not an accurate gauge of the housing market because many pending deals fall out. True, many pending deals do fall through, but that has been going on for years. There’s really no difference in the frequency of unsuccessful pending sales this year compared to prior years. Thus, if there is a decrease in pending deals this year compared to last year, closed sales will decrease as well. Pending sales is the absolute best gauge for knowing what’s going on in the housing market trenches TODAY. So much attention is placed on closing sales, but that is a very accurate gauge for what was happening in the market two months ago. For example, year over year demand has been off up until this month. Today, demand, the number of new pending sales over the prior month, sits at 2,894 pending sales, 24 more homes than last year. That’s not much, but I will bet all the money in the world that year over year closed sales in September will be nearly the same or slightly higher than last year. Where do we go from here? Demand will continue to follow a normal housing cycle and will be just a little bit better than last year’s numbers. The end of the summer market will occur with the beginning of the new school year. We can expect demand to drop slightly during the autumn market, September through the first couple of weeks of November. Demand will drop to its lowest levels of the year during the holiday/winter market, from Thanksgiving through February. Do to all of the distractions of the holidays, the absolute slowest, rock bottom time of the year for demand is from Thanksgiving through the first few weeks of the New Year.
The Active Listing Inventory: after slightly increasing this year, the inventory will continue to drop through New Year’s Day
After a painful 2007 and 2008, homeowners finally understood that the heydays of the earlier 2000’s were gone and were not coming back anytime soon. Those years were marked by a swelling of the active listing inventory and a majority of sellers were simply unsuccessful. In 2007, the inventory blossomed to nearly 18,000 homes on the market. In 2008, it almost reached 16,000 homes. In 2009, after being fooled for two years, the discretionary homeowner emerged. For the most part, homeowners knew that either they had the stomach to do what it takes to successfully sell or they simply did not place their homes on the market. The active listing inventory dropped by 35% that year, finishing the year at just 7,381 homes, levels not seen since 2005. The first time home buyer tax credit that expired in November helped clean up the inventory substantially. But, it was the discretionary homeowner that saved the day that year. In 2010, the discretionary homeowner took a hiatus and from the beginning of the year until mid-September, the inventory grew by an astonishing 63%, erasing all of the progress of 2009. That happened despite the second $8,000 credit. In the trenches, agents were stating that sellers were placing their homes on the market at unrealistic levels. Bank foreclosures, short sales and equity sellers all fell into the trap of being overzealous. With the spring and summer markets gone, the inventory dropped from September through the end of the year by 14%. 2011 started with an active listing inventory of 9,987 homes and increased by 14% until it reached a 2011 peak a month ago at 11,388. In the past month, the listing inventory shed 68 homes, less than 1%. The agents in the trenches state that there are still plenty of unrealistic homeowners. Most successful sellers have to reduce their price at least once. Homes sell due to three factors: price, location and condition. A homeowner can do nothing about changing their location. They do have control over price and condition. In this market, where every buyer is looking for a “deal” and not willing to pay a dime over the market value, price is by far the most important element to success. Buyers do not care what a seller needs to net from their home. They don’t care if a seller thinks there home is the best and has top notch upgrades. Instead, these spreadsheet buyers are going to carefully arrive at price and will walk away if they feel a seller is not being realistic. They would rather wait for another home to come onto the market than overpay. So, where will the active listing inventory go from here? The inventory may even increase a little through August, but will start to drop during the autumn market and at a more accelerated rate during the holiday/winter markets. Many sellers will throw in the towel after being unsuccessful in their attempts to sell, and will avoid the slower seasons. The listing inventory will not start to increase until after the New Year.

Three Distinctly Different Markets: the expected market time is vastly different depending upon the price range.
In terms of expected market time, there are three distinctly different price ranges. For the county as a whole, the expected market time is just shy of four months. But, we need to drill down a little bit deeper to get the real story. The below $500,000 price range makes up 51% of the active inventory and 68% of demand. That means that only 32% of demand can be found in homes above $500,000. The expected market time for homes priced below the $500,000 mark is only 2.95 months, a seller’s market. In that range, buyers can expect a lot more competition, multiple offers and sales prices at or near their asking prices. The average sale is just 2% lower than the asking price. That’s not a lot of room in the price. Buyers in this range often get burned a couple of times before sharpening their pencils and writing very realistic offers to purchase. Many sellers start off too high, but when they come down to realistic levels, sell very fast. The second distinctly different market is the $500,000 to $1 million range. The expected market time is 4.6 months, very close to equilibrium. Realistic pricing is an absolute must and can still take a while to procure an offer. Buyers in this range still should not get too zealous. The average sale is only 3% off of the asking price. That’s a little bit of room, but buyers who desire to submit low ball offers should not waste their time. The final range is homes priced above $1 million. The expected market time is just under a year. The higher the range, the longer it will take to sell. For homes priced above $4 million, 306 on the market today, the expected market time is 51 months. Buyers looking to buy above $1 million need to know that many homes are unrealistically priced. The average sale is 7% off of the asking price. In this range, 7% is sizable. Sellers need to very carefully arrive at price. They also need to know that there just are not enough buyers in the market looking for high priced homes. Even with an accurate price, many sellers need to pack their patience and wait for the right buyer to come along.

The Distressed Market: the active distressed inventory has remained basically the same all year long.
Yes, everybody is looking for a deal, but this market has its share of definite challenges. The active distressed inventory currently sits at its lowest level of the year, 3,713 homes and has shed 404 homes since the start of the year. Everybody has heard of the infamous “shadow inventory,” but that does not mean there is going to be a wave of distressed homes to hit the market. Instead, the market will go up or down only slightly will be very slow to change. For foreclosures, there are only 687 on the market today with an expected market time of 1.73 months, a very HOT seller’s market. Buyers can expect tremendous competition. Short sales appear to be a great bargain, but when they are priced too far below market value, they procure a lot of attention and so many offers, that they often sell way above their asking prices. Then, the waiting game begins. The average short sale takes months to put together as everybody has to wait on the first trust deed holder, all junior loan holders, and, often, a homeowner association attorney. The deal is not put together until all players agree to take less than what is owed. Some short sales that are not as complicated can take just a few weeks for lender approval, while others can take as long as a year to put together. There are currently 3,026 short sales on the active market, 26% of all active listings in Orange County. The expected market time for short sales is 2.83 months and they attract a lot of attention. Expect more of the same when it comes to the distressed market. It’s not going to change much anytime soon.

Copyright 2011 - Steven Thomas, Broker, www.ReportsOnHousing.com - All Rights Reserved. This report may not be reproduced in whole or part without express written permission by author.

Orange County Housing Report May 26

2011-05-31T10:10:00.000-07:00

Orange County Housing Report: Double Dip Hype

May 26, 2011

Good Afternoon!

I don’t know about you, but I love a double dip… in chocolate! Pundits and the media are transforming something I love into a buzzword based on conjecture and sensationalism.

Double Dip: Searching on Google for “Double Dip Housing” yields 1,175,000 results
Let’s take a closer look. There are 72,000 results for a double dip in housing in just the last 24 hours, 281,000 in the last week, and 924,000 in the last month. So, what consititues a “double dip.” I don’t know about you, but the term sounds so negative, it gives the impression that we may be in store for a second round of price drops equal to the first huge drop. Let me be the first to tell you… NO WAY. The First Dip: the average home in Orange County dropped about 35% in value. The latest statistic that has received tremendous press is the Standard & Poor’s/Case-Shiller home-price index for Los Angeles and Orange counties, where the combined counties dropped 2.1% year over year. Orange County’s current median sales price, $432,000, is 1.6% off from a year ago. Those numbers do not indicate a housing dip. They are part of market fluctuations. Demand and prices have been a little subdued in 2011 thus far. Everybody, including me, tried to explain and rationalize the housing market behavior. I have finally put my finger on it: too much hype about a double dip. The hype may have subdued demand a bit, but it’s not responsible for the latest reports of a drop in the median price. It all stems from the expiration of the first time home buyer tax credit in the spring of last year. The market in 2010 was HOT through the end of April. In order to take advantage of the credit, a property had to be under contract by April 30, 2010. Demand dropped precipitously from May 1st on. It made for a much slower market through December 2010. Essentially, the credit pulled a lot of sales forward to the beginning of the year. With lower sales, year over year prices dropped a little bit. With that drop, the headlines and media talked about the possiblity of a double dip. That was enough to slow down shell shocked consumers and move many buyers to the fence. Yet, prices have already dropped 35%. A 2.1% drop is a giant yawn in comparison. Some economists are forecasting a slight INCREASE in prices for the remainder of the year. Either way, focusing on any kind of dip is silly, given that it will not be a giant dip like in ROUND 1. Instead, buyers should be focusing on record low interest rates. We know that rates will rise, and when they do, mark my words, they will rise fast, erasing any gains in waiting for prices to dip. As a matter of fact, buyers will be paying more in terms of a monthly mortgage payment even if prices dip a little.

Housing Demand: Demand has continued to cool.
Demand, the number of new pending sales over the past month, increased for the first time in two months, adding an additional 10 homes and now totals 3,052 pending sales. Last year at this time demand was at 3,303 pending sales. It was still under the influence of the first time home buyer tax credit. Many buyers that wanted to buy and take advantage of the credit couldn’t because they lost out on several multiple offer situations. Some buyers that fell into this category walked away, but many opted to still buy despite no government subsidy. Today’s demand is not under the influence of a government subsidy. As buyers begin to understand that today’s incredible interest rates are not here to stay, demand will ultimately increase. That may not come until interest rates start to rise because of inflation, which it inevitably will. The likelihood of consumers ever seeing rates like this again during their lifetime is equivalent to the likelihood of gas prices returning to $2.00 per gallon.

The Active Listing Inventory: There has been very little change in the active listing inventory over the past month.
In the trenches I am told that there isn’t a lot of fresh inventory. Unlike last year, the inventory has not been growing at an alarming, unrealistic pace. Sellers’ expectations are more in check and much more discretionary compared to last year. Over the past month, the active inventory has only grown by 88 homes, now totaling 11,219. Last year at this time, the inventory grew by 488 homes within the prior month and totaled 9,839 homes, pushing its way to the 10,000 mark by the first week of June.

The Distressed Market: the active distressed inventory increased by 10 homes in the past couple of weeks.
Contrary to everybody’s expectations, the distressed inventory has actually dropped by 303 homes. Not much has changed within the distressed market. The distressed inventory now totals 3,808 and represents 33.9% of the active inventory. The expected market time for foreclosures is remains incredibly HOT at 1.63 months. There are currently only 669 foreclosures within the active listing inventory, an increase of five homes in the past two weeks. There are currently 3,139 short sales on the active market, decreasing by five homes in the past two weeks. The expected market time is 2.84 months for short sales, also a seller’s market.

Have a wonderful weekend.

Sincerely,
Brian McGarvin
Realtor
Cell 949.370.2652

Investing in San Clemente Re4al Estate

2011-05-29T10:51:00.000-07:00

Investing In San Clemente Ca Real Estate

If you are among the many, who have been wanting to invest in the San Clemente, Calif., real estate market, then there may not be a better time than the present. While some would prefer to wait until prices are at absolute rock bottom, the harsh reality is that predicting "rock bottom" is difficult in the 21st Century real estate market. While some are reporting that the "new norm" for unemployment is 9%, and that can certainly affect home sales and home pricing, real estate is a cyclical market, and it usually comes back to prominence following extended downturns such as the one the US is currently experiencing.

Recent months in the San Clemente region have seen inventory start to dissipate. That means more people are buying, and less homes are on the market, an indication that pricing may have finally "bottomed." Supply and demand dictates pricing in the real estate market wherever you go. As these factors fluctuate, so, too, can prices. Of the 9 available areas within the San Clemente region, realtors and agents are starting to see unheard of low prices for the quality and location of home. To determine which home you want to live in, you must first decide what is important to you with regards to location. Do you like instant beachside access, or are you more about overlooking views? The areas within San Clemente offer the best of both worlds and the chance to find the home of your dreams in the location of your dreams.

Once you have determined what it is you want from the location, you need to start thinking about home features and square footage. Observe what the price per square foot tagged on the home is, and then compare to other new homes and older homes in the region. Work with your realtor to determine a reasonable offer that will be of serious consideration to the seller. Also, see if there are any buying advantages available, such as short sale home listings. Being able to "rescue" a homeowner from foreclosure can allow you to get into a home at a much cheaper rate than you otherwise would. But for this to be effective, it is important that you act fast.

Acting fast requires the expertise of an experienced agent familiar with the San Clemente region. Scratch that. It requires the expertise of an experienced agent, who knows all 9 areas inside and out. Timing is of the utmost importance to capturing one of these bargain homes, and in order for time to be on your side, you need to know which homes are at risk of becoming short sales so that you can make an offer within minutes. That will give you the competitive advantage over other buyers. Also keep in mind that real estate agents only send in one offer to the bank on a short sale so acting quickly can secure your spot with the bank. Make sure your offer is clean and don't ask for a lot of extra items from the seller. You want to get the seller excited about your offer so they will accept it and send it to the bank for the short sale approval. Buying a home in San Clemente can be a fun venture if you understand the process and have a professional real estate agent on your side.

OC Housing Report April 2011

2011-04-18T12:08:00.000-07:00

Orange County Housing Report: Welcome to Fantasyland

April 14, 2011

Good Afternoon!

The market realities are much different than buyer expectations when it comes to distressed homes.

Foreclosures and Short Sales: 44% of all sales in March were either a foreclosure or a short sale.
Understandably, every buyer is looking for a deal in today’s market. Nobody sits across from a REALTOR® for the first time and asks to pay fair market value for a home. No way! The market is way down from its height in the mid-2000’s, they should be able to secure a “deal.” That is how the logic flows for buyers today. In reading newspaper articles or watching the news, when it comes to real estate, it is easy to see where everybody arrives at the misconception that it must be a buyer’s market. Buyers gravitate to foreclosures and short sales in search of that proverbial deal. With so many buyers flocking to distressed properties, there is tremendous competition. For the market as a whole, the expected market time is 3.36 months, a slight seller’s market. That’s right, a “seller’s market.” So, if it is a seller’s market, why aren’t home values appreciating right now? The answer is simple; with so many distressed properties on the market, they are keeping a lid on appreciation. Buyers simply do not want to overpay for a home, even if there is a lot of competition with multiple offers. Instead, values are holding steady in the lower ranges, homes below $750,000. Who ultimately is the winning bidder on a home? It is not necessarily the “all cash” buyer. In a multiple offer situation, when two offers are identical, cash beats out a buyer in need of financing. Most homes are sold to buyers that have been burned once or twice before they finally believe that is not a buyer’s market. In order to finally secure a home, they sharpen their pencil and are ready to pay the fair market value for a home. There are plenty of Lowball Larry’s out there writing tons of offers at deep discounts in hopes that somebody out there has to be desperate enough to take their offer. Those buyers ultimately just end up wasting a lot of people’s time, especially the REALTOR® that they are working with. For foreclosures, the expected market time is a sizzling HOT 1.39 months, a deep seller’s market. Buyers should expect the most competition in dealing with foreclosures. Short sales, sellers who owe more than the current market value of their home and require lender approval of any sale, have an expected market time of 2.52 months, also a hot seller’s market. With so many buyers turning to distressed homes to chase after that misleading “deal,” it is no wonder that it is the hottest segment of the market. There are not enough foreclosures to go around, either. They represent only 6% of the current active inventory and 20% of all sales in March. Short sales represent 29% of the active listing inventory and 24%of all sales in March. Yet, there is a disconnect when it comes to short sales. Almost 40% of demand is made up of short sales, but they only make up about 25% of closed sales. The trouble is that, on average, short sales take a very long time to close, and, in many cases, they fall out of escrow and have to secure a new buyer. Short sales are the most complex transaction. Often there are multiple lenders, delinquent property taxes, and delinquent homeowner association dues. When the homeowner falls too far behind in association dues, attorneys often get involved, making the process even more complicated. The sell requires the approval of all lenders and the association and the property taxes need to be paid current. Arriving at a successful close requires a lot of perseverance and patience.

Housing Demand: Demand cooled a bit in the past couple of weeks.
Demand, the number of new pending sales over the past month, decreased by 2%, shedding 76 pending sales and now totals 3,282. That’s still much stronger than the beginning of the year. It will be interesting to see if cooling demand was related to unusually cooler weather and rainstorms or the first sign of a new trend. I am going to go out on a limb and state that it is most likely just a temporary blip on the radar screen.

The Active Listing Inventory: With slightly slower demand, the active listing inventory grew.
Typically, demand increases during this time of the year. Since it actually dropped a little, there weren’t as many pending sales to eat into the active inventory. Instead, the listing inventory increased by 272 homes in the past two weeks and now totals 11,028. That’s the first time that the inventory has surpassed 11,000 homes since November 2010. Last year, the active listing inventory grew unabated as unrealistic homeowners flooded the market. Unrealistic homeowners become unsuccessful sellers until they finally reach the conclusion that the price needs to be dropped to the fair market value or they need to simply pull their homes off the market and throw in the towel. Thus far this year, for the most part, homeowners are figuring it out again: market your home if and only if you have what it takes to get the home sold. Carefully arriving at the fair market value is fundamental to successfully selling.

Orange County Housing Report For Spring 2011

2011-03-19T10:57:00.000-07:00

Orange County Housing Report: Spring is Here!

March 18, 2011

Good Afternoon!

Spring forward has a new meaning this year, Orange County housing demand is springing into action.

Housing Demand: Demand is at its highest level since August of last year.
That’s correct. Demand is taking off DESPITE the lack of government intervention in the form of a tax credit. Last year at this time the market was very robust. But, right after the first time home buyer tax credit ended at the end of April, demand took a giant nosedive. It was right smack in the middle of the spring market, typically the best time of the year in terms of demand. This year is very different. The market is functioning without a credit to artificially stimulate the market. Current demand may be trailing last year’s numbers, but I guarantee that there will not be a nosedive in demand in the middle of this year’s spring market. I have often said that in housing there are no guarantees, but I am willing to make an exception this time. The real estate market is finally following a normal cyclical pattern, something it has not done in years. Here’s a quick recap of a “normal” cycle to refresh our memory. Spring is the best time of the year to sell, the current market. It runs from now through mid-June. Pending sales during the spring translate to higher closings in the summer. The summer is when families prefer to move, when the kids are out of school and can nicely transition into a new school. The summer is the second best time of year to sell, but not quite as robust as the spring. Many summer pending sales do not close until the autumn, right after the kids are in school. The autumn is the third best time of year to sell, as demand contracts a bit more. The slowest time of the year to sell is the holiday market, from Halloween until the first couple of weeks of the New Year. A normal market is refreshing. It is much easier to make decisions when we know what is around the corner.

Demand, the number of new pending sales over the past month, increased by 225 in just two weeks and now totals 2,982. At the beginning of the year, demand was at 1,856 pending sales. Since then, it has increased by 61%. Last year at this time there were 288 additional pending sales, propped up by the $8,000 first time homebuyer tax credit.

The Active Listing Inventory: Homeowners are finally getting it, placing their homes on the market if and only if they have to.
Another refreshing aspect to the current market is the fact that the active listing inventory is not growing uncontrollably like it did last year. Like last year, it has grown unabated since the start of the New Year, but not at the same rate. The active listing inventory only added 67 additional homes over the past two weeks and now totals 10,828, less than a 1% increase. Last year at this time, the inventory grew at a 4% clip in the same two week period, adding an additional 330 homes. There were 8,876 homes on the active inventory back then; but, it had increased by 20% from the beginning of the year, compared to only 8% thus far this year. Last year the inventory grew unabated through mid-September because homeowners were placing their homes on the market at unrealistic levels. Many approached the market as to what they “needed to get” out of their home, instead of what the market would truly bear. The overall market was doing much better in the lower ranges. Multiple counter offers, offers close to or at their asking prices, frustrated buyers, and quick sales were all very common. However, that did not mean that buyers were willing to pay much of a premium for a home. Buyers today are “spreadsheet buyers,” buyers that want to carefully analyze as much data as possible before arriving at an offer price. With so many distressed homes on the market, mixed with uncertainty about the future, values are just not ready to appreciate. That does not mean that buyers are going to land a home at a 20% discount. In February, the sales price to list price ratio was 3%, meaning that the average home sold at only a 3% discount. For buyers, low ball offers are a ridiculous waste of time. Similarly, unrealistic, overzealous pricing by sellers is a ridiculous waste of time. The current trend of realistic, discretionary homeowners is another healthy sign in today’s Orange County housing market.

The Distressed Market: 49% of all closed sales in February were either a short sale or foreclosure.
The distressed market plays a major role in today’s market. 35% of the active listing inventory is either a short sale or a foreclosure. 50% of all homes priced below $500,000 are distressed, the hottest price range with an expected market time of a little over three months. Only 6% of all homes above $1 million are distressed, the coolest price range with an expected market time of a little over eight months. In the month of February, 20% of all closed sales were a foreclosure, 29% were short sales, and 51% were homeowners with equity in their homes, also known as “equity sellers” in the real estate trenches. In the past two weeks, the distressed inventory increased by 52 homes and now totals 3,797. There are 699 foreclosures on the market, increasing by 13 homes in the past two weeks. The expected market time for foreclosures is an incredibly HOT 1.64 months. There are currently 3,098 short sales on the active market, an increase of 39 homes in the past two weeks. The expected market time is 2.65 months, a seller’s market.

Have a wonderful weekend.

Sincerely,
Steven Thomas
Broker
Cell 949.874.8221
Copyright 2011 - Steven Thomas, Broker - All Rights Reserved. This report may not be reproduced in whole or part without express written permission by author.

Bi-Weekly OC Real Estate Report

2010-11-26T10:30:00.000-08:00

Orange County Housing Report: Giving Thanks

November 24, 2010

Good Afternoon!

It is the time of the year to reflect and give thanks. Regarding the Orange County housing market, there’s still a lot to be thankful for.

Thanksgiving Reflection: Even though the housing market is extremely frustrating, there is plenty to be thankful for.

I am thankful that lenders are approving short sales and that they are closing.
That’s right. I am thankful that lender approval is eventually bestowed upon some short sales, enabling homeowners to escape the nightmare process of selling their underwater homes. I think everybody can agree, including the lenders, that they are still falling way below the bar in terms of making a decision in a reasonable amount of time. There is tremendous room for improvement. The average number of monthly closed short sales this year is 574. Yet, there are 3,045 pending short sales. Most short sales take months for an answer. And, the more complex the short sale, second liens, unpaid homeowner association dues, unpaid property taxes, and mortgage insurance companies, the longer and more challenging it is to successfully close the sale. Yet, I am thankful that some short sales are closing. Lenders are allowing upside down homeowners in dire straits to move on. In turn, they obtain a home typically in better condition and save a lot more money compared to the alternative, foreclosure.

I am thankful that real estate agents are still selling homes despite the tremendous obstacles and frustrations in this market.
Despite misguided public perception, real estate agents in today’s market work ten times harder than any modern era real estate cycle and are paid much less compared to the boom years. Throw on top of that no change in the agent population locally here in Orange County despite the downturn. Here are some of the obstacles they face: tremendous competition, extremely tight credit, short sales that take forever to close, frustrated buyers, sellers in unfortunate situations, and unrealistic expectations of buyers and sellers. Yes, this market has been extremely frustrating, but real estate agents continue to pick themselves up and take great care of their buyers and sellers.

I am thankful that unrealistic sellers are finally figuring it out: if they don’t drop the price, they must pull their home off the market and stop wasting everybody’s time.
The listing inventory blossomed this year, growing from 7,165 homes at the beginning of the year until it peaked in mid-September at 11,892 homes. That’s an increase of 4,727 homes, or 65%. Since peaking, the listing inventory has shed 1,056 homes, or 9%. Unfortunately many homeowners were extremely unrealistic in their expectations of the housing market. They heard about year over year increases in the median sales price, buyers competing to buy homes, multiple offers, and sales price at or above their asking prices. They did not realize that buyers in the most competitive markets were only willing to pay a few thousand dollars above the last asking price, NOT thousands upon thousands of dollars more. Buyers are spreadsheet buyers, meaning they will pour over comparable and pending sales data to arrive at a comfortable price. So, many homeowners placed their homes on the market overpriced and waited and waited with no results. Most homes on the market had to decrease their prices to achieve success. For those unwilling to reduce their asking prices, pulling their homes off of the market is the only other alternative. Distressed properties are keeping a lid on any appreciation. There are still many homeowners that remain on the market at unrealistic levels; however, I am thankful that many of them will be continuing to pull their homes off as the Holiday market progresses.

I am thankful that the market is theoretically a seller’s market, based upon the expected market time.
For a seller’s market, the expected market time must be less than five months. At its best this year, the expected market time dropped to 2.53 months in mid-May. It is currently at 4.02 months, still a seller’s market. But, with so many distressed listings, there is very little appreciation, if any. As long as Orange County’s expected market time indicates a seller’s market, prices will not depreciate. And, it looks as if 2011 is poised to be a seller’s market as well, great news for values.

Active Listing Inventory: The listing inventory continued to drop, shedding 3% in just two weeks.

The active listing inventory continued its decent, dropping 589 homes over the last month, now totaling 10,836. That’s a 5% drop in just four weeks. Many unrealistically priced sellers are starting to realize that throwing in the towel is their best option. Last year at this time there were 3,181 fewer homes on the active inventory compared to today.

The Listing Inventory Has Peaked

2010-10-06T11:02:00.000-07:00

Orange County Housing Report: The Listing Inventory Has Peaked

September 30, 2010

Good Afternoon!

With a hint of Halloween on the horizon, it is officially the Autumn market. As is typical for this time of year, the active listing inventory is now dropping.

Active Listing Inventory: For the first time this year, the listing inventory dropped.
Up until this week, the inventory has been growing unabated. Even with increased demand at the beginning of the year, the inventory still grew. The inventory is not dropping because of an increase in demand. Instead, more and more sellers have finally come to the correct conclusion that the Spring and Summer markets are behind us and we are going into a slower season to sell. 2010 will be remembered for the absence of the discretionary seller. Too many homeowners read into the fact that demand was strong with multiple offers and homes selling above their list prices. There were reports of year over year increases in the median sales price and homes selling very quickly. Many homeowners have been waiting years to sell with a turn in the market. So, home after home came on the market at unrealistic prices and ultimately just sat on the market. Foreclosures were not immune to the phenomena as banks were overpricing many of their homes as well. Prior to 2010, during the housing downturn everybody approached the housing market carefully with complete discretion. This year has been a lesson to many homeowners as they have had to pick between reducing their prices to realistic levels or pulling their homes off the market completely. The drop in the active listing inventory is due to more sellers coming to the conclusion that it is time to throw in the towel. There were 11,892 homes on the market two weeks ago, the height of 2010. Today, there are 88 fewer homes on the market. Last year there were 3,887 fewer homes on the market, a result of discretionary homeowners.

Demand: For the first time in six weeks, demand increased.
Typically for this time of year demand drops. Not this year. Instead, demand, the number of new pending deals over the past month, increased by 2%, adding an additional 66 homes compared to two weeks ago, now totaling 2,756 pending sales. With the end of the first time home buyer tax credit back at the end of April, demand dropped considerably after the expiration. Many real estate analysts believe that first time homebuyers demand was pulled forward to March and April as they rushed to cash in on the $8,000 credit. They further believed that demand would begin to recover during the Autumn market as new first time home buyers finally entered the market. This could be the beginning of a surge in first time homebuyer activity. All of the ingredients are there: low prices, historically low interest rates, more realistic sellers. Last year at this time demand was at 3,270 pending sales. But, last year’s demand was stimulated by an earlier first time home buyer tax credit that was set to expire in November 2009.

Lack of Focus on Rates: Unbelievably, interest rates fail to motivate buyers to buy.
Where’s the news reports regarding historically low rates and their tremendous impact on the monthly payment and a buyer’s ability to purchase? Talking about interest must not sell newspapers or magazines. The media and general public are just not interested in the subject. Talking about the median price going up or down 1% turns heads, but talking about an increase in interest rates of 1% doesn’t. However, a 1% jump in interest rates has a much larger impact on affordability and a monthly payment. Interest rates were 1% higher one year ago and are currently at levels never seen before. These low levels will NOT last. They WILL go up. For a $500,000 loan, if rates go up 1% and return to last year’s level, the monthly payment will go up by $300 per month. That’s $3,600 per year or $18,000 in 5 years. Somebody should make a story out of that. Instead, the $8,000 first time home buyer tax credit has sizzle and everybody talks about it. $18,000 in anybody’s pocket is a lot more than $8,000 and is not isolated to just first time home buyers. The government has poured so much money into the economy. When this occurs, the historical impact is eventually increased inflation. So, as soon as the economy starts to improve, the Federal Reserve will pump up interest rates to help curb inflation. When that happens, expect interest rates to jump at least one percent. ATTENTION BUYERS: DO NOT TAKE THESE INTEREST RATES FOR GRANTED, THEY WILL NOT LAST FOREVER. In 1980, rates were around 18%. In 1990, they were around 10%. In 2000, they were at 8%. Rates are currently below 4.5%. If rates eventually increased to 8%, the $500,000 mortgage would be almost $1,200 per month more. Quite simply these interest rates should motivate buyers to buy. Those buyers that cash in and buy now will be remembered as the lucky ones who were able to take advantage of the market downturn.

Foreclosures and Short Sales: The distressed inventory remained basically unchanged.
The active distressed inventory grew by only 13 homes over the past two weeks and now totals 4,039 total foreclosures and short sales. The distressed inventory now represents 34% of the current active inventory. Last year at this time, there were 2,319 distressed homes on the market, 1,720 fewer than today. The number of foreclosures within the active listing inventory dropped by 10 homes in the past two weeks from 708 to 698. The expected market time for foreclosures is 1.96 months, still an exceptionally HOT seller’s market. Short sales, where a homeowner attempts to sell a home for less than the total outstanding loans against a home, requiring lender approval, increased by 23 homes over the past two weeks and now total 3,341. The expected market time for short sales is 3.28 months, much slower than 1.53 months posted last April.

Copyright 2010 - Steven Thomas, Altera Real Estate - All Rights Reserved. This report may not be reproduced in whole or part without express written permission by author.

Orange County Housing report

2010-08-23T10:43:00.000-07:00

Active Listing Inventory: The unabated growth has slowed but still hasn’t reached a peak
The Orange County inventory continued to grow over the past couple of weeks, adding an additional 236 homes and now totals 11,650. This is the highest level since December 2008. With school starting, many homeowners realize that the best time of year to sell has passed them by. As more and more sellers come to grips with the market realities, expect many of them to throw in the towel and pull their homes off the market. There are a lot of equity sellers on the market, nearly 7,900 or 68% of the active market. Many of these sellers will opt to sit out the Autumn and Holiday markets. Last year at this time there were only 8,531 homes on the market, 3,119 fewer than today.
Expected Market Time: The tale of two markets continues and the higher ranges are SLOW.
For homes priced below $1 million, the expected market time is 3.34 months. This range represents 80% of the active inventory and 93% of demand. For homes priced above $1 million, the expected market time is 10.48 months, the higher the range, the slower the expected market time. This range represents 20% of the active inventory, but only 7% of demand. The slowest range, homes priced above $4 million, has an expected market time of 26 months. The hottest market in Orange County is Talega with an expected market time of only 2.22 months. The slowest market in Orange County is Corona del Mar with an expected market time of 11.5 months and an average list price of $3.5 million. Last year at this time the expected market time was 2.43 months.

Housing Demand: Not much of a change in housing demand.
Demand, the number of new pending sales over the past month, increased by only 30 homes in the past two weeks, a 1% increase, and now totals 3,002. That is the first time that demand surpasses the 3,000 mark since the beginning of July. That is still 25% below the end of April peak that totaled 3,979. Last year at this time demand was at 3,506 pending sales, 504 more than today. From here, we can expect demand to slowly drop as we enter the next season of the Orange County housing market, the Autumn market, from the start of school through the pleas of “trick or treat.” From there, housing demand will cool further as we enter the Holiday market, from Halloween through the first couple of weeks of the New Year. There are a lot of distractions during the holidays and real estate typically is placed on the back burner.

Foreclosures and Short Sales: The distressed inventory continues to grow at a very rapid pace.
There really isn’t a “normal cycle” for predicting the level of the distressed inventory throughout the year. When homeowners owe more than their homes are worth and they can no longer afford their monthly payments, they place their homes on the market as short sales regardless of the time of year. Likewise, banks place foreclosures on the market after they have completed the foreclosure process and prepared the homes for sale. This process takes months to complete, so foreclosures are placed on the market regardless of the time of year. We are all acutely aware that there is a “shadow inventory” of homes that are not making their monthly payments and are either attempting to modify their loans, or are trying to sell their homes as short sales, or are staying put and doing nothing. According to various reports the “shadow inventory” totals between five and seven million homes. This shadow inventory has to be worked through, but is not going to occur as a tsunami of distressed properties to hit the market all at once. Instead, we are going to witness slow increases and drops over the next few years. This slow absorption will not pull down values like it did at the beginning of this downturn and it will keep a lid on any substantial appreciation. Once employment improves, the pathway to an eventual healthy and stable recovery will occur. The distressed inventory increased by 182 homes in the past two weeks, the largest increase since December of 2008, and now totals 3,757 homes. Foreclosures increased by only 6 homes in the past two weeks and now total 659. The expected market time for foreclosures is 1.82 months. There are an additional 176 short sales in the past two weeks and now total 3,098. The expected market time for short sales is 2.99 months.

Demand for housing is back to normal

2010-06-27T11:17:00.000-07:00

Orange County Housing Report: Demand is Normal Again

June 24, 2010

Good Afternoon!

After dropping nearly 22%, Orange County housing demand is now in a normal summer cyclical pattern.

Housing Demand: Over the last 5 years the average drop in demand was 3.2%, this year it was only 2%.
Whatever the reason, the end of school, graduation, the start of summer, demand cyclically drops at this time of year. The only difference this time around is that demand had already dropped 20% due to the end of the Federal first time home buyer tax credit. When demand reached 3,979 pending sales on April 29th, the height for 2010, and the highest threshold in almost five years, there was a rush to purchase by first time home buyers. That segment accounted for 25% of Orange County’s housing activity. With so many of them pushing to purchase by a deadline, it left a void in demand for the six weeks that followed the expiration. It wasn’t until the past two weeks when the normal housing pattern for Orange County reemerged. Earlier in the year, the market followed a normal pattern as well, until March and April. Demand grew by 30% in those two months, and then subsequently, dropped almost 22% in May and June. Demand, the number of new pending sales over the prior month, decreased by 60 in the past two weeks and now totals 3,107. For the second report in a row, demand is less than the prior year with 522 fewer pending sales compared to 2009. From here, demand typically falls in the next two weeks and then climbs at the end of July. With the distraction of the Fourth of July weekend coming up, that sounds fairly accurate.

Active Listing Inventory: The inventory has continued to grow unabated since the beginning of the year.
Last year the inventory dropped by 36%. This year, however, the Orange County housing inventory has grown by 3,034 homes, a 43% increase. In the past two weeks, the inventory has grown by 345 homes, a 3% increase, and now totals 10,469. This is also the second report in a row where the inventory is higher than last year. Last year the inventory was at 9,188 homes, 1,274 fewer than today. The drop in demand is partially to blame for the increase in the inventory, but keep in mind that it was still increasing unabated when demand was at its highest level in years. We have also heard that the market is really hot in lower price ranges, which is true, just ask any buyer. However, all ranges have experienced an

increase in inventory, especially homes between $250,000 and $1 million. For homes priced between $500,000 and $750,000, the inventory has increased by 60%. The reason for the increase in inventory is because there are many homeowners who have held off on selling their home, pent up sellers, who have been waiting for the market to turn so that they could take advantage of the market and sell their home. Homeowners have heard about the hot market in the lower ranges with a lot of activity, multiple offers and homes selling for very close to their asking prices, and in many cases, above their asking prices. The problem is that many of these pent up homeowners are placing their homes on the market at unrealistic levels, thousands above the most recent comparable and pending sales. Buyers in today’s market have become “spreadsheet buyers,” pouring over the comparables and not wanting to pay much more than the last buyer. With demand hot, many are willing to pay a bit of a premium to purchase their dream home, but more along the lines of an extra $5,000, not $15,000 or more. As long as the overall economy’s health is in limbo and more distressed homes are hitting the market, buyers are unwilling to pay an extravagant premium to own a home. As a seller, it is imperative to carefully consider all recent comparable sales, taking into account location and amenities, and price accordingly. Then, listen carefully to how the market responds to your home and make any necessary adjustments.

Foreclosures and Short Sales: since October 1, 2009, the distressed inventory has grown by 37%.
The active distressed inventory has increased from 2,346 homes on October 1st and now totals 3,217, levels not seen since May of 2009. The distressed inventory now represents 31% of the current active inventory. Last year at this time, there were 2,919 distressed homes on the market, representing 32% of the active inventory. The number of foreclosures within the active listing inventory increased by 29 homes in the past two weeks from 530 to 559. The expected market time for foreclosures is 1.52 months, an exceptionally HOT seller’s market. Short sales, where a homeowner attempts to sell a home for less than the total outstanding loans against a home, requiring lender approval, increased by 108 homes over the past two weeks and now total 2,658. The expected market time for short sales is 2.28 months, still a HOT seller’s market.

Interest Rates: Interest rates are at a 60 year low and will NOT last.
Everybody is so focused on price and the current historically low interest rates have become an expected part of our real estate market. However, with all of the money that the Federal government has poured into our economy, there is a real threat of major inflation on the horizon. One of the only ways to counter the threat is to raise rates. Due to the lackluster economy, the Federal Reserve is currently stuck and unable to raise rates in the short run, but sooner or later they will be forced to make a change. Rates are predicted to increase to 6% over the course of the next year. As interest rates rise, buyers can afford less of a home. This is best illustrated in an example. For a buyer with an income of $100,000 and putting 20% down, a rise in interest rates from 5% to 6% equates in a drop in home affordability from $590,000 to $540,000, a $50,000 drop. Buyers waiting for that “good buy” may find it next year, but at a price, with higher rates and a larger monthly payment.

Economic Report April

2010-05-01T10:12:00.000-07:00

Orange County Housing Report: End of Credit Won’t End Demand

April 29, 2010

Good Afternoon!
At the stroke of midnight on April 30th the Federal first time home buyer tax credit will end, but there is just too much demand for it to spell the end to demand. Everybody within the real estate trenches, blogs and media have been looking to the end of the tax credit like the infamous Y2K predictions of a little more than decade ago. Remember those days? I had a neighbor who bought a trash can from the local hardware store and filled it with bottled water and canned good
s claiming that the end of life as we knew it was upon us. Governments, banks, power companies, airports, traffic systems and more were all supposed to fail on the first day of the year 2000. Nothing really happened. For Orange County real estate, the end of the tax credit is not going to have much of an impact either. Don’t get me wrong; all of the government stimulus has definitely had a profound impact of the real estate market right in our very own backyard; however, it is time to move on. The program has to end sometime and it might as well be during the hottest time of the year, the Spring market. Yes, we have had buyers hurry to cash in on the credits, but there are enough first time home buyers that have been unsuccessful in purchasing thus far that will still be looking. The reports from the trenches are that these buyers are not about to do an about face and leave the market with their tales between their legs. More recently, many buyers saw the credit as a perk. The new California tax credit that starts this Monday is only going to last about a week due to the fact that only 17,500 first time home buyers in ALL of California will obtain the $10,000 credit (spread over three years) before the funds runs out. Yet, when California announced the credit about a month ago, demand was already hot. It did nothing to instigate more demand. The problem has been not enough supply in the lower ranges where first time home buyer activity is the greatest, not a lack of demand. Also, first time home buyer activity has been bumping along at about 25% of total activity. It is not going to drop significantly and there are plenty of non-first time home buyers in the marketplace as well.

Interest Rates: Rates are expected to rise which drops home affordability.

Buyers are motivated to purchase knowing that the expected rise in interest rates will ultimately make their payments go up. But, it is more than that. As interest rates rise, buyers can afford less of a home. This is best illustrated in an example. For a buyer with an income of $100,000 and putting 20% down, a rise in interest rates from 5% to 6% equates in in home affordability from $590,000 to $540,000, a $50,000 drop. With the government no longer committing to purchasing pools of loans, which ended on March 31st, interest rates are expected to rise a full percent over the coming year.

Housing Demand: Demand has not seen these levels since June of 2005
Demand, the number of new pending sales over the prior month, increased by 231 homes over the prior two weeks and now totals 3,979, a 3% increase and the height thus far in 2010. Demand is 347 pending sales stronger than last year at this time and 1,439 stronger than two years ago. Demand should hit a plateau through the remainder of the Spring market.

Active Listing Inventory: The active inventory has continued its gradual climb and just reached levels not seen since June of last year.
Over the past two weeks, the inventory has increased by 231 homes to 9,351, a 2% increase. We started the year at 7,165 listings and have added 2,186 homes to the active inventory to date. Last year, the inventory continued to drop from mid-March to the New Year. The increase seems gradual, but when looked at since the beginning of the year, a 31% increase is pretty profound. Agents in the trenches are stating that there are more overpriced, unrealistic sellers placing their homes on the market. Prior to the start of the year I forecasted that the discretionary seller would return; however, if more and more homes are placed on the market at unrealistic values, the inventory will continue to rise. This rise in inventory could dampen demand. This is a trend that we will have to continue to watch. If you are a homeowner contemplating placing your home on the market much higher than the most recent comparable sales and pending activity, the current market will not support your line of thinking. Buyers are not willing to pay a sizeable sum extra for a home simply because there is more demand and more competition. There is just too much distress that remains in the market and the distressed market is keeping a lid on appreciation.

Expected Market Time: Every price range experienced a drop in the expected market time.
The expected market time for all of Orange County dropped slightly from 2.45 months two weeks ago to 2.35 months today. Yet, there still are two distinct markets: homes priced below $1 million, HOT, and homes priced above $1 million COLD. It is important to note that the lower the range, the HOTTER the market. For homes priced below $500,000, the hottest range, the expected market time is 1.6 months. Compare that to homes priced above $4 million where the expected market time is a frigid 29.5 months.

Distressed Inventory: The number of active foreclosures increased while the number of active short sales decreased.
The number of active distressed homes on the market, all short sales and foreclosures combined, increased by only 9 homes in the past two weeks and now total 2,790, or 29.8% of the current active inventory. Last year at this time, there were 3,724 distressed homes on the market, representing 35.9% of the active inventory. The number of foreclosures within the active listing inventory increased by 38 homes in the past two weeks from 416 to 454. The expected market time for foreclosures is 1.12 months, an extremely HOT seller’s market. Short sales, where a homeowner attempts to sell a home for less than the total outstanding loans against a home, which requires lender approval, decreased by 29 homes over the past two weeks and now total 2,336. The expected market time for short sales is 1.53 months, also a HOT seller’s market. Everybody’s looking for a deal, so there’s a lot of competition in purchasing foreclosures and short sales.

Have a wonderful weekend.

Sincerely,
Steven Thomas
Altera Real Estate
President
"Pride Begins at Home”
Office 949.389.7816
Cell 949.874.8221
www.AlteraProperties.com

Copyright 2010 - Steven Thomas, Altera Real Estate - All Rights Reserved. This report may not be reproduced in whole or part without express written permission by author.

Economic Report

2010-03-10T10:31:00.000-08:00

OVERVIEW ~ As now seems the usual course for the markets, sentiment among investors turned from optimistic, over the week of Feb. 16 (Feb. 15 was a holiday) to Feb. 19, to pessimistic in the week that followed. At the start of the day on Monday, Feb. 22, the Dow Jones Industrial Average (DJIA) had risen to 10402.35. By the end of the week, the DJIA had declined to 10325.26. This is not a precipitous fall, but stock market indices remained somewhat sluggish over the entire week, brought down by disappointing economic indicators and worries about developments in Greece. Further, the week saw very large Treasury security auctions in which bidders pushed rates slightly higher than the Treasury had anticipated. Again, not a great deal higher, but enough to create worry, particularly over Monday’s and Wednesday’s auctions. The Freddie Mac average 30-year fixed-rate, meanwhile, rose from 4.93% the week prior to 5.05% on Thursday, Feb. 25. This signaled the possibility of an on-going uptrend among mortgage rates (though, as always, concerns that present events foretell future trends usually fall away as the mood among investors moves from negative to positive and back again).

FOLLOW-UP ~ Greece remained in the news, postponing its sales of 10-year notes for one to two weeks, much to the concern of international investors. Greece needs to borrow at least 54 billion this year to pay off existing notes and bonds; it has thus far raised 13 billion. About 22 billion of bonds mature in March and April, and so Greece is under the gun to find enough money to pay off the 22 billion. The country also currently faces the possibility that Standard & Poor’s, and possibly other rating agencies, will lower its rating for Greece, which could make it still harder for Greece to sell its notes.

Coming this spring as well, the Fed will stop helping keep mortgage rates low as its program of buying very large quantities of mortgage-backed securities (MBSs) comes to an end. Investors have had plenty of advance warning that this will happen, and it is therefore difficult to predict the reaction in the markets. More important, though, we can’t know to what extent this will leave the MBS markets vulnerable to an imbalance of growing supply and lower demand, elevating the rates required by investors.

FOCUS ~ The Federal Reserve Board Chairman, in testimony before Congress on Wednesday, Feb. 24, once again reassured the markets that the Fed would continue to help keep rates low for an “extended period.” His comments appeared to briefly help lift the stock index nearly a full percent, but investors remain skeptical, worried that interest rates may turn higher before the Fed Chairman currently predicts they will. The rate the Fed charges at its “discount window,” after all, was nudged higher last week. And purchases of MBSs will cease in March. What we can see here is an anxiety among investors which cannot be salved by the Fed chief (surely assuring continued market volatility) as rates and indices climb and fall unpredictably

SHORT SALES WILL CLOG THE SYSTEM IN 2010

2010-02-22T11:09:00.000-08:00

Orange County Housing Report: Short Sales Clog the System

February 18, 2010

Good Afternoon!

Short sales, sales of homes for less than what is owed on the mortgage, are creating a backlog of pending sales that take FOREVER to close. 2010 is going to be the year of the short sale. With an enormous glut of foreclosures in 2008, the Federal government stepped in and in 2009 virtually strong armed big lenders to modify loans. The problem is that not everybody qualifies for a loan modification and many successful loan modifications default again on their loans down the road. Yet, there are still a tremendous number of homeowners in trouble. Both the government and banks are in agreement, that they don’t want to foreclose unless there is virtually no other alternative. And, there is a better alternative, short sales. There are many advantages to short sales for the homeowner; including, the ability to purchase again sooner. For the lender, they get to take advantage of pride in homeownership, the homes are not dilapidated and, unlike foreclosures, do not require thousands of dollars to fix nor do they have significant holding costs. So, at the end of November 2009, the US Treasury put together a short sale directive that outlines a new process that begins on April 5, 2010, for all Fannie Mae and Freddie Mac loans. In the interim, lenders have been scrambling to address the new program and modify their current processes that have been ineffective thus far. Currently, the short sale process is NOT working and has resulted in a deluge of pending sales that take forever to close. There are currently 6,706 outstanding pending sales in all of Orange County. Of those, 4,154, or 62%, are short sales. The problem is that almost 70% have been pending for over one month. Many have been pending for months. The reason these do not close within a short period of time is because they require lender approval. And, if there is a second loan, the process is even longer. Throw in the fact that many short sale homeowners have stopped paying their homeowner association dues, and they too have to sign off on the deal if they are obtaining less than what is owed. Often, the buyer of a pending short sale grows so frustrated that they cancel and look elsewhere. The short sale is then placed back on the market and is often placed right back into pending status in a short period of time, and the wait for lender approval continues. With short sales, the buyer, seller and offer must all qualify. The buyer must qualify for the new loan. The seller must qualify to obtain the short sale; there must truly be a hardship. Finally, the offer to purchase must be at or near fair market value. With demand so hot, lenders are taking a closer look at value and not willing to sell at a major discount. The current process for short sales is an absolute crapshoot. Real estate agents, buyers and sellers enter into a pending sale with no definitive timeline. Some lenders are better than others. Some second lenders are better than others. Some Realtors® are better than others. 2010 promises to be the year of the short sale. It is the year where a lot of the distressed backlog, often referred to as the “shadow inventory,” will finally be properly diminished in the form of short sales. Yes, there will still be foreclosures. Some short sales simply will not go together. Some homeowners will just walk away from their obligations. But, banks and the government have their sights set on going the short sale route. It is in everybody’s best interest. Buyers, sellers and agents have had their sights set on short sales for about a year and half now. If you are skeptical, just take a look at the following chart, the number of short sales versus foreclosures in Orange County:

As 2010 rolls along, the process is going to get better and better. It will not be perfect, but it will be better than it is right now. Short sales will finally result in more successful closed sales.

So, how do the rest of the numbers look? The active inventory increased over the past two weeks by 278 homes, or 4%, to 8,135. The active inventory last year was at 11,541, 3,406 additional homes compared to today. Two years ago it was at 15,392, 7,257 additional homes. Demand, the number of new pending sales over the prior 30-days, decreased by 4 to 3,244. There are 425 additional pending sales compared to last year and 1,424 compared to two years ago. Demand typically rises at a quicker pace in the middle of February, so we will have to see if this trend continues. Part of the problem is that there simply is not a lot of new inventory coming on the market. The biggest complaint from agents down in the trenches is that they need fresh inventory for the many buyers that they are working. The expected market time for all price ranges in Orange County increased slightly from 2.42 months two weeks ago to 2.51 months today. At the current pace, the overall market is a seller’s market without much appreciation at all. The number of distressed homes within the Orange County housing market is keeping a lid on appreciation. On the other hand, the higher end price ranges are experiencing a deep buyer’s market, the higher the price range, the deeper the buyer’s market. The hottest price range is homes priced between $250,000 and $500,000, with an expected market time of 1.75 months. Contrast that with homes priced above $4 million with an expected market time of 33.89 months. The active distressed home market, all short sales and foreclosures combined, increased by 54 homes to 2,705. The number of foreclosures within the active listing inventory increased in the past two weeks from 377 to 380, a gain of only three. The expected market time for foreclosures is a sizzling 0.95 months, a deep seller’s market. Foreclosures are HOT. The number of short sales within the active listing inventory increased by 54 and now totals 2,705. The expected market time for short sales is 1.68 months, also a deep seller’s market. There are a lot more short sales than foreclosures. In 2010, short sales will be KING.

Have a wonderful weekend.

2010-02-13T11:18:00.000-08:00

What Happens After the Stimulus Ends? (The national picture)
Low mortgage rates and incentives for first-time homebuyers helped arrest the long slide in home sales, housing starts, and home prices during 2009. Sales of both new and existing homes perked up toward the end of last year and house prices, as measured by the three most popular indices, stabilized during the second half of the year. New home construction also picked up modestly, and a number of homebuilders actually returned to profitability, again with the help of tax refunds from operating-loss carry backs. Foreclosure activity remains high, but lenders, at the urging of government regulators, are making extraordinary efforts to reduce foreclosures and are also showing restraint in unloading foreclosed homes into the already bloated resale market. With so much of the recovery tied to some sort of stimulus, and much of that stimulus set to end in the coming months, the natural question is what happens to the housing market after the stimulus ends?
Home sales and new home construction will recover less rapidly than the pace for which many would hope. We see new home sales rising close to 20 percent on an annual average basis and look for existing home purchases to climb 9 percent. While those increases sound impressive, much of the improvement has already taken place as 2009 ended on such a strong note. Sales likely got off to a slow start in 2010 because of unusually harsh weather in January and February, which are two of the seasonally weakest months of the year. Demand should pick up in March and April as new home sales, which are recorded at the time a contract is signed, would need to be booked by the end of April in order to close on new homes by June 30. Existing home sales, which are recorded at closing, will likely ramp up in May and June. Our expectation is that home sales and new construction will gradually grind higher, reflecting a modest improvement in employment conditions, record-high housing affordability and a slight relaxation in lending requirements in parts of the country.

What might shock the housing market in 2010

2010-01-31T14:10:00.000-08:00

Journalists frequently ask industry insiders and outside watchers about their outlooks for
the housing market. In response, we typically hear what real estate professionals expect to
happen in the coming months.
Since we know that the economy likes to throw more than a few curve balls, we recently
asked around town what influential people in this business thought might be the
unexpected for 2010, the shocking housing surprises we all might be talking about a year
from now.
Michael Reynolds, The Concord Group:
“A decline in home prices. Despite good affordability metrics, uncertainty surrounding the
size of the foreclosure pool combined with the elimination of the federal home buyer tax
credit (April 30, 2010) may lead home prices downward. Banks have been stalling on the
foreclosure process with the intent of limiting available home supply for sale and propping
prices. Should banks ramp up on the foreclosure process in 2010, a glut of foreclosure
homes on the market would place downward pressure on home prices.”
Kristine Thalman, Building Industry Association of Orange County: “That the foreclosure
problem was not as bad as predicted in Orange County. We will also be saying, ‘I should
have bought that house!’ I also see a whole new way of financing construction, due to the
banks’ unpredictability and unwillingness to invest.”
Gary Macrides, Orange County Association of Realtors: “The loss of Proposition 13 tax
protections on commercial and multifamily buildings. At least three petitions in circulation
would create a split-roll tax assessment system. It could be devastating to business
owners, and may slam the door shut on commercial investment properties in California.”
Pat Veling, Real Data Strategies: “In- creased sales activity in the luxury property
segment. It is very possible that prices will fall far enough that average guys like me will
make a move on that coastal property we have wanted, but for which we were unwilling to
pay. As an active, hopeful buyer in Laguna Beach, I can tell you firsthand that livable
homes within a three- or four-block walk to the beach are being bought surprisingly fast
and at prices we thought sellers would not get.”
Mark Boud, Real Estate Economics: “The new-home market may rebound more
dramatically than the overall housing market. For example, new homes being offered on
the Irvine Ranch may absorb and appreciate faster than anyone anticipates – partly due to
the lack of competitive new-home inventory and partly due to a faster-than-anticipated
drop in distressed housing inventory. As early as January, there may be a bit of a new
home ‘frenzy’ on the Irvine Ranch.”
Anil Puri, Cal State Fullerton:
“Housing prices fall by 10 percent.”
Steve Thomas, Altera Real Estate:
“The increase in completed short sales, surpassing the number of completed foreclosures.
Over the past several months, there have been more closed short sales than foreclosures.
That fact does not make it a true surprise. Yet, it will be a surprise

Prices to rise in 2010

2010-01-31T14:07:00.000-08:00

Home prices to rise 6.75%, study predicts January 3, 2010
A Santa Ana company makes a 2009-10 estimate for county real estate.
By JEFF COLLINS
Santa Ana-based First American CoreLogic projects a 6.75 percent increase to occur in
local home prices over the 12 months ending in October 2010, a smaller increase than
those predicted in past months.
Last month First American projected a 10.94 percent increase in house prices by
September. Before that it projected a 9.53 percent gain by August.
A UCLA forecaster has projected that home prices could climb as much as 16 percent in
2010, while others expect prices to increase by no more than 2 percent to 3 percent, if at
all.
In addition, First American’s Home Price Index shows:
House prices declined 5 percent in October from the year before, compared with a 6.7
percent year-over-year price drop in September.
When sales of distressed houses are excluded, the index of house prices dropped 5.8
percent in October. Distressed sales tend to pull home prices up because of heightened
demand for those residences.
Orange County’s October price compares with a 10.8 percent year-over-year drop in Los
Angeles County, a 9.6 percent drop statewide and a 7.8 percent drop nationally

2010-01-06T14:40:00.000-08:00

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Orange County Housing Report
This is a biweekly report that closely analyzes the Orange County housing market - Altera Real Estate
Tuesday, December 29, 2009

Orange County Housing Report: HAPPY NEW YEAR – A 2010 FORECAST
HAPPY NEW YEAR!!! Now, what does that mean for Orange County real estate? First, let me clarify that forecasting draws from historical data and circumstances to predict the future. Yet, we are currently in uncharted waters, making forecasting the housing market more of an art than an exact science. There have already been many forecasts released that are all over the map. It reminds me of picking NFL football games during the first week of the year when there are a lot of surprises. With that in mind, let’s take a look back at what happened in 2009 in terms of inventory, demand, expected market time and distressed properties.The Active Inventory: We started the year with 11,326 homes on the market. The discretionary homeowner returned, knowing that the market was full of challenges and competition. Values had already dropped substantially, especially in the lower ranges. The active inventory reached its peak of 11,606 homes by the end of March, 280 additional homes compared to the beginning of the year, a 2.5% increase. From there, the inventory continued to drop steadily throughout the year. Currently, the active inventory has continued its downward trend, shedding another 207 homes and bringing the inventory to 7,381 homes, a 36% drop from the peak. The inventory has dropped to levels not seen since December of 2005. In comparison, the 2008 active inventory grew from 14,944 homes in January and peaked in March at 15,617 homes, a 4.5% increase. From there, the 2008 inventory dropped 26% through the end of the year to 11,842. In 2006 and 2007, the active inventory blossomed throughout the year and peaked in August. In both 2008 and 2009, the inventory had dropped to a much healthier level with the help from the discretionary homeowner. Had discretionary homeowners not been present, we could have been looking at inventory levels hovering around the 20,000 mark. The drop in the active listing inventory has also been aided by the number of short sales that have been placed into “Backup” position. Short sales, homeowners that owe more than their home is worth, are subject to lender approval of accepting less than the full loan amount. Many short sales continued to market their homes as active listings even though they had an acceptable agreement between a buyer and the seller. They remained on the market until they had “lender approval.” This resulted in an artificially high active inventory. This has since changed and the active inventory today is a much more accurate depiction of the real active inventory.Demand: Just like in 2008, demand, the number of new pending sales within the prior month, continuously grew unabated. It was plodding along, ignoring cyclical ups and downs from week to week. Demand grew from 2,008 homes in the beginning of January to its peak of 3,652 homes in June, an 82% increase. After June, just like in 2008, demand followed the normal cyclical, seasonal pattern. Demand was boosted by the major drop in home values over the prior couple of years, increased affordability, historically low interest rates, the first time home buyer tax credit and the sheer number of distressed properties on the market. In 2008, a peak in demand of 3,060 homes was reached in June, and then slowed for the Autumn and Holiday markets. Currently, in keeping up with the normal Holiday market cycle, demand dropped by 523 homes in the past month to 2,515 homes. That is still much healthier than last year at this time when demand dropped to 1,997 homes, 21% slower than today. In 2007, demand was at 1,031 homes, 59% slower. Current demand is also at the strongest level for the finish to a year since I started tracking the Orange County housing market five years ago.Expected Market Time: Orange County started off the year with an expected market time of 5.62 months. But, as demand continued to pick up steam and the inventory dropped, the expected market time methodically declined and reached a bottom in September of 2.33 months. Currently the expected market time is at 2.93 months. In 2008 the expected market time started the year at 14.97 months and dropped to 5.93 months at the end of the year. In 2007 the expected market time started the year at 7.78 months and increased to 15.05 at the end of the year. The current expected market time is also at a much healthier level going into 2010. At the current expected market time, it is technically a seller’s market. Distressed properties are keeping a lid on any real appreciation, but all of the other trimmings that go along with a seller’s market are very much a part of today’s housing landscape: multiple offers, sale prices above list prices, tremendous competition, and buyer frustration.Distressed Properties: The big story of 2008 was how much the distressed inventory grew and became such a large part of the housing market. This year, the big story was how the number of distressed properties had dropped. With moratoriums on foreclosures at the beginning of the year and the government insisting upon loan modifications, the number of foreclosures dropped throughout the year. In the beginning of 2009 there were 5,118 distressed homes on the market, both short sales and foreclosures, representing 45% of the active inventory. The distressed inventory dropped 46% to a low of 2,346 in October, representing 31% of the active inventory. With a decrease in demand due to the holidays, the current active distressed inventory increased by 41 homes over the past month and is now at 2,537 homes, representing 34% of the total inventory. In 2008, the distressed inventory started the year at 3,858 homes, peaked in August at 5,950 homes and then dropped to 5,379 homes at the end of the year. Short sales make up 85% of the distressed inventory versus 15% for foreclosures. At the beginning of the year, distressed properties made up 69% of demand versus 55% today. There is tremendous demand for distressed properties. Even though it is the Holiday market, the expected market time for all foreclosures is at 1.07 months, a DEEP SELLER’s market. The sales to list price ratio for foreclosures in the month of November was 104%. That means that the average foreclosure sold for 4% ABOVE the list price. There are only 378 foreclosures actively listed today. One year ago there were 1,294. There is similar demand for short sales with an expected market time of 2.12 months. The sales to list price ratio for short sales in November was at 99%. Short sales have become a major part of the housing market and will be throughout 2010. There are 2,159 short sales on the active market, 4,037 short sales are pending and 856 have been placed on hold. All of these statuses combined total 7,093. Short sales represent 48% of all listings, pendings and properties on hold. As a buyer, it is very difficult to avoid short sales and their lengthy process. The bottom line, there is tremendous demand for distressed properties and buyers should not have the expectation of being able to offer much less than the purchase price.2009, a look back: Perhaps the biggest surprise of the year has been the large drop in distressed sales. Throughout the year, everybody has heard of various foreclosure moratoriums and the pending wave of foreclosures to come, also known as the “shadow inventory.” The shadow inventory includes all homes that have been foreclosed on but the lender purposefully held off of the market, all homes scheduled for a trustees deed upon sale (the final foreclosure action) and, most important, all homes that are 90 days or more delinquent. There is a giant shadow inventory, but many economists and analysts have made the error of presuming that lenders are purposely holding already foreclosed homes off of the market. Instead, most of the shadow inventory is already on the market as short sales. There are over 7,000 in Orange County alone that are on the active market, pending or on hold. In Los Angeles, there are over 13,000, in Riverside there are over 8,000, in San Bernardino there are over 5,700, an in San Diego there are over 8,500. Minus Ventura County, there are over 42,000 short sales in Southern California alone. The short sales have piled up across the United States. There has been tremendous pressure from the federal government for lenders to modify loans. Thus far the program has not been that successful. Now they are turning their sites on short sales. The government wants lenders to modify first, short sale second, and, as a last resort, foreclose. On November 30th of this year, the Obama administration, through the U.S. Treasury, released the Home Affordable Foreclosure Alternative Program (HAFA), providing financial incentives to servicers and borrowers who utilize a short sale or a deed-in-lieu to avoid a foreclosure on an eligible loan. In response, lenders are already gearing up to handle the volume of short sales.The first time home buyer tax credit also had a positive impact on the housing market along with the increased conventional loan limit to $729,750. The tax credit was supposed to end November 30th, but has since been extended through June of next year. So, we can expect a bump in activity due to the credit for the first half of 2010. The government was late to provide an extension to the increased conventional loan limit from 2008. So the first few months, the conventional loan limit dropped to $625,500 and then it was increased again to $729,750. The increase was set to expire at the end of 2009, but this time the government actually planned ahead and extended the increase through the end of 2010. This is very important to the Orange County housing market since loans above the conventional loan limit, jumbo loans, are much more difficult to obtain.What can we expect in 2010? The federal government has been working overtime to help instigate an increase in demand and an eventual recovery within the real estate sector. The first time home buyer tax credit has been expanded to include move-up buyers who need to sell their homes first and extended through June of next year (homes need to be pending by April 30th and close by June 30th). As discussed prior, the conventional loan limit has been extended through all of 2010. But, the biggest wild card for 2010 is what will eventually happen to interest rates as the Federal Reserve halts the purchase of mortgage-backed securities. Here is my forecast:
The lower end, below $1 million, and especially below $750,000, will continue to experience strong demand and values will remain flat or appreciate slightly. Homes priced below $1 million accounts for 76% of the active listing inventory and 94% of demand. Buyers and sellers can continue to expect multiple offers and sales prices at or above the list price. Bottom feeders need not waste their time.
The upper end, above $1 million, and especially above $2 million, will continue to experience muted demand along with a drop in value. The upper end is catching up with the large drops in value within the lower end. The drop in value will be led by an increase in distressed sales in the upper ranges. Jumbo loans may be tougher to obtain in the upper ranges, but as values drop, demand will increase. The appetite for upper end distressed sales has grown and, with proper pricing, will attract higher demand and multiple offers.
The number of units sold will increase year over year slightly. The difference will be much stronger in the first quarter of 2010 and the gap will tighten for the remainder of the year. For the most part, the demand curve will closely mirror 2009.
The discretionary seller will return to the marketplace, keeping inventory levels at a healthy level. We can expect the active inventory to grow to no more than 9,000 homes.
Short sales will be king in 2010. With the federal government turning their attention to short sales, the process is going to get a whole lot better. The government had been strong arming lenders to modify loans, but success has been very limited. There will be a lot more short sale approvals, which translates to successful closed short sales. The infamous “shadow inventory” will actually translate to more short sales. Short sales are already a major component of today’s real estate market. The only thing missing right now is a higher success rate and that is about to change. Expect the number of closed short sales to continue to exceed the number of closed foreclosures on a monthly basis.
The number of foreclosures to hit the market will increase slightly year over year, but will NOT be a wave fueled by the “shadow inventory.”
We can expect the distressed inventory to rise slowly with more short sales and foreclosures to hit the market; but, this will be offset by incredible demand for distressed properties. With demand so high, distressed properties will be placed at the last comparable sale, not below.
As the Federal Reserve purchase of mortgage-backed securities comes to an end after the first quarter of 2010, interest rates will rise to about 6%. That may seem like a giant jump, but 6% is still low historically.
It is going to by a long wait for homeowners waiting for the market to rebound. With unemployment high and more distressed homes to hit the market, the most likely scenario is going to be a flat market for the next couple of years, with no real appreciation or depreciation.
There have been a lot of lessons learned from the housing speculative bubble. The most important lesson has to be that people need to look for a place to call “home” for the long term, making sure that their family can afford the monthly payment. If a homeowner pays their 30-year fixed rate mortgage for 30-years, they own their home free and clear. Historically, in the long run, a home is a great investment. Your home is not an asset that is meant to be flipped every two years because the government has made it convenient to write off the gains. A home is place to call your own and a great place to raise a family or retire. And, in my humble opinion, you cannot beat Orange County as a place to call home.
Posted by Steven Thomas at 11:30 AM
Labels: altera, forecast, foreclosure, housing report, orange county, real estate, short sale, steve thomas

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Blog Archive
▼ 2009 (18)
▼ December (2)
Orange County Housing Report: HAPPY NEW YEAR – A ...
Orange County Housing Report: A Holiday Pause
► November (3)
Orange County Housing Report: Thankful for Afford...
Orange County Housing Report: Short Sales are a N...
Orange County Housing Report: Lack of Inventory i...
► October (1)
Orange County Housing Report: Two Polar Opposite ...
► September (2)
Top 10 OC Housing Trends
Orange County Housing Report: End of Summer Cycle...
► August (1)
Demand is Up and Supply is Down
► July (1)
Orange County Housing Report: A Seasonal Summer D...
► May (1)
Orange County Housing Report: The Distressed Inve...
► April (2)
Orange County Housing Report: The Spring Surge Co...
Orange County Housing Report: Demand Suddenly Sur...
► March (2)
Orange County Housing Report: 21% Fewer Distresse...
Orange County Housing Report: A Stimulating Pause...
► February (1)
Orange County Housing Report: Demand Takes Off
► January (2)
Orange County Housing Report: Waiting on Stimulus...
Orange County Housing Report: A Much Better Start...
► 2008 (16)
► December (2)
Orange County Housing Report: HAPPY NEW YEAR – A ...
Orange County Housing Report: Lower Ranges Hot, U...
► November (3)
The Government Will Fuel Demand
Buying Season is Upon Us
Demand Slows with Holiday Market
► October (2)
Orange County Housing Report: Brisk Activity Desp...
Orange County Housing Report: Inventory Drops Bel...
► September (1)
Market Time Report: Expected Market Time Remains ...
► August (1)
Market Time Report: Current Demand Double 2007 Le...
► July (2)
Market Time Report: Demand 50% Stronger Compared ...
Market Time Report: June 2008 Closed Sales 11% Be...
► June (1)
Market Time Report: Demand Surges as the Inventor...
► May (2)
Market Time Report: Demand Far Exceeds 2007 Level...
Market Time Report: The First Time Wave is Growin...
► April (2)
Market Time Report: First Time Home Buyers are Ba...
Market Time Report: Housing Demand Stronger than ...

About Me
Steven Thomas
Aliso Viejo, California, United States
President of Altera Real Estate in Orange County, California. Altera has offices throughout Orange County and over 350 associates. View my complete profile

2009-12-16T10:45:00.000-08:00

I wanted to bring to your attention some important details about the recently announced Home Affordable Foreclosure Alternatives program (HAFA), which provides instructions for lenders and servicers participating in the Making Home Affordable Program and Home Affordable Modification Program (HAMP).
HAFA helps standardize the short sale and deed-in-lieu process by creating an alternative to foreclosures for homeowners unable to successfully modify their troubled mortgage under HAMP.
Although not perfect, the program reflects C.A.R.’s efforts in the federal arena to standardize the short sale process, protect your business, and safeguard commissions. It also makes clear the timeframes by which servicers must respond to an offer on a short sale.
The HAFA program will permit pre-approved short sale terms before a property is listed; prevent servicers from attempting to reduce real estate commissions established in the listing agreement as a condition for short sale approval; release borrowers from future liability for the debt; and provide financial incentives to borrowers, servicers, and investors.
Under terms of the program, the borrower and/or listing broker have three business days to submit an executed purchase offer and related documents to the servicer on a short sale, and the servicer has 10 business days to respond to an executed purchase offer. The servicer may negotiate the real estate commission prior to the listing of the property, not to exceed 6 percent, but once this has been agreed to the commission may not be reduced at a later date.
The servicer also will determine the minimum net proceeds for a short sale; if an offer presented to the servicer by the borrower or listing broker meets the net proceeds requirement, then the servicer must accept it.
Each participating servicer also must develop a written policy that describes the basis on which the servicer will offer the HAFA program to borrowers. All borrowers must be evaluated for a loan modification prior to going to HAFA. For additional information, please go to car.org at http://www.car.org/governmentalaffairs/federal/ustreasuryfap/.
HAFA is a step in the right direction toward helping distressed homeowners now, and is an effective tool to quickly move distressed properties through the market. Although HAFA goes into effect April 5, 2010, our expectation is that servicers may choose to implement it earlier. The program is available only for non-Fannie Mae- or Freddie Mac-owned loans up to $729,750. C.A.R. will continue to reach out to servicers and lenders to encourage their adoption of HAFA and other programs that will help California’s housing market continue to recover. We anticipate that Fannie and Freddie will release their own guidelines soon, and we will share details with you as soon as they are available.

2009-12-11T14:32:00.000-08:00

Click here to view “Beyond the Headlines,” a version specifically formatted for consumers that you can print, share via e-mail, or post on your Web site.
Welcome to C.A.R.’s Market Matters, your weekly market response guide.

Los Angeles Times

Shaving real estate commissions can save sellers thousandsAs home values have declined, a recent Los Angeles Times article questioned the compensation a REALTOR® receives for his/her efforts. While REALTORS®’ compensation may be an important factor for sellers to consider, it should not be the deciding factor.

MAKING SENSE OF THE STORY FOR CONSUMERS

Rather than focusing on a REALTOR®’s compensation, consumers instead should focus on identifying and selecting a REALTOR® who best meets their needs and unique situation. The guidance and value a REALTOR® brings to the transaction cannot be determined by his or her commission rate alone. In this instance, the saying “you get what you pay for,” may ring true. Consumers should interview several REALTORS® to identify the best fit for them and their situation.
It’s critical to point out that although there are more than half a million licensed agents, not every real estate agent is a REALTOR® who voluntarily agrees to subscribe to a strict Code of Ethics. As members of their local, state, and national associations of REALTORS®, REALTORS® constantly receive updates on the latest housing legislation impacting them and their clients. Additionally, REALTORS® have access to the latest technologies for the real estate industry, including critical housing data, pricing trends, time on market, and historical sales activity in the neighborhood. These tools and resources enable REALTORS® to provide the highest level of service possible, including helping sellers determine the best price for their home in today’s market.
A REALTOR® also can assist with the critical negotiations included in every real estate transaction, and help both buyers and sellers finalize the many details that comprise a purchase agreement. For sellers, a REALTOR®’s role may include negotiating a sale price and other terms in this tough market. A REALTOR® also can help sellers determine what, if any, repairs may be the owner’s responsibility, and can help negotiate deadlines for their completion.
To read the full story, please click here.

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In Other News
The New York Times
New rules for counselorsOlder homeowners who are considering a reverse mortgage can now get more help in the decision-making process. The Federal Housing Administration, which insures reverse mortgages, last month instituted new standards for the counselors who, according to federal law, must meet with prospective borrowers before a loan can be approved.
To read the full story, please click here.
Los Angeles Times
IRS to outline changes in the home buyer tax credit programIf you’re thinking about applying for the new $6,500 home buyer federal tax credit or the extended $8,000 version, the Internal Revenue Service has just issued its first formal guidelines for you.
To read the full story, please click here.
The Wall Street Journal
House flipping makes a comebackFour years after the collapse of the U.S. housing bubble, flipping homes is back in fashion.
To read the full story, please click here.
San Francisco Chronicle
Less competition in the market over holidaysRecent good news about the housing market has many home buyers wondering whether now is a good time to buy. For example, home sales activity increased 9.4 percent nationally in September, a 26 percent increase from a low point in January, according to the NATIONAL ASSOCIATION OF REALTORS®.
To read the full story, please click here.
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The Mercury News
Now’s really the time to buy a home, many sayMortgage rates are hovering at historic lows, home prices are just starting to edge up from total collapse, and the government is offering tax breaks to first-time and move-up buyers.
To read the full story, please click here.
Los Angeles Times
Consumer borrowing falls for 9th straight monthThe Federal Reserve says consumers borrowed less for a record ninth straight month in October. It was another sign that consumer spending will remain weak, making it harder for the economy to mount a sustained rebound.
To read the full story, please click here.
Reuters
Quarter in U.S. foreclosure plan late on paymentsMore than one-quarter of homeowners receiving help under a U.S. government foreclosure prevention plan are behind on their new mortgage payments, a Treasury Dept. survey has found.
To read the full story, please click here.
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Talking PointsHere’s what to tell consumers...
Many homeowners have been enticed lately by mortgage interest rates hovering near 5 percent, leading some to think about refinancing their home. The first step owners should take is to have their property’s value assessed and to contact a REALTOR® to find out what similar homes are selling for in the area, as opposed to their listing prices. If there have been a high number of foreclosures in the neighborhood, chances are property values have declined.
Most lenders today will not complete a home loan refinance unless the owner has at least 20 percent equity in the property and proof of income. However, homeowners who are underwater—those who owe more on the mortgage than the home is worth—still may qualify for a home refinance. Some federal programs allow homeowners to refinance their mortgage up to 125 percent of the home’s value.
Some home loans include prepayment penalties, meaning the homeowner has to pay a penalty for paying the loan off earlier than the original loan terms. Prepayment includes refinancing, as the original loan is paid off through the refinance. If the fees are equal or close to the amount the owner would save with a refinance, then refinancing the home may not be the best option.
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Market Matters is published by the CALIFORNIA ASSOCIATION OF REALTORS®, a trade association representing more than 175,000 REALTORS® statewide. Edited by: Mark Giberson, (markg@car.org) and Mary Burroughs, (maryb@car.org) Executive offices:525 South Virgil Ave., Los Angeles CA 90020phone (213) 739-8200; fax (213) 480-7724 Legislative offices:980 Ninth Street #1430, Sacramento CA 95814phone (916) 492-5200; fax (916) 444-2033 To view C.A.R.'s Privacy Policy click on this link:http://www.car.org/aboutus/privacypolicyTo contact C.A.R., click on this link:http://www.car.org/?view=ContactUs Written inquiries regarding Market Matters should be directed to Mary Burroughs, (maryb@car.org).

Shore Sales Are A Nightmare

2009-11-18T12:58:00.000-08:00

Orange County Housing Report: Short Sales are a Nightmare

November 12, 2009

Good Afternoon!

Have you ever pedalled up a steep hill on your bicycle as a kid only to wonder if you were going to ever make it? That’s the same feeling that buyers, sellers and agents get in trying to arrive at a successful close date. Short sales are homes where the asking price is less than the outstanding loan amounts. These are subject to the lender’s approval. This takes anywhere from weeks to months. There is nothing short about a short sale. About a year ago, it was just about impossible for agents to show a short sale to a prospective buyer. Nine times out of ten, the short sale already had at least one offer on the home and submitted to the lender for approval. However, the home remained on the market as an active listing until the approval was received. So, agents would show their buyers home after home only to find out that most short sales already had an offer submitted, which amounted to a giant waste of everybody’s time. Agents then would contact every short sale to see if it was “really” available. This stemmed from the fact that an escrow is not opened until after lender approval. Escrow is not opened so that expenses are not incurred for any work completed. Inspections, homeowner association documentation, appraisals, etcetera, are all fee based and time sensitive and nobody is going to want to pick up the tab if a lender does not approve a file or if there are significant delays. The short sale data has been cleaned up over the course of the last year. It is mandatory for all offers that are submitted to a lender to be placed in “Backup Offer” status or “Pending Sale” status within the Multiple Listing Service. I used to reference the overstated active listing inventory and the understated pending sale statistics last year at this time. The data is still not perfect, but is much improved and easier for agents and buyers to look at homes. In response to so many short sales no longer counted as a part of the active listing inventory, the total pending sale inventory has blossomed. There are currently 6,838 total pending sales. 58% are short sales, only 8% are foreclosures and 33% are homeowners with equity. There are 3,703 pending sales that have been pending for more than one month. 76% are short sales, 5% are foreclosures and 19% are homeowners with equity. There are 2,132 pending sales that are have been pending for more than two months. A stunning 91% are short sales, 1% are foreclosures and 8% are homeowners with equity. Almost a third of the total pending sales count has been pending for more than two months and most are short sales. Even though more and more homeowners have defaulted on loans, lenders have not been foreclosing. As a result, the market has grown much hotter with an increase in successful short sales and a shift to more equity sellers. Here’s a breakdown:

The huge increase in pending short sales has not materialized as a huge increase in closed short sales. All of these numbers illustrate that dealing with short sales is like bicycling up a steep hill as a kid. Just because a buyer’s offers is accepted, if it is a short sale, it is going to take a long time to close escrow. Since short sales are distressed, their pricing attracts a lot of attention from buyers. Buyers can expect multiple offers in dealing with short sales. In the end, buyers have to move quickly and compete with other offers only to wait for a long period of time for the seller to obtain lender approval. Sometimes the process takes such a long time that the buyer walks away and looks for something else. Many move onto equity sellers. The Orange County real estate market and the entire state of California are at the mercy of lenders. The bottom line, the market is full of challenges and the short sale process makes the current real estate landscape even more challenging.

So, how do the rest of the numbers look? The market has continued to not change much over the past few months. Once again, the past two weeks are no exception. The active listing inventory decreased slightly by 30 homes over the past two weeks, totaling 7,719. That’s 5,539 fewer than last year and 9,514 fewer than two years ago. The inventory has dropped by 4,123 homes so far this year, a 35% drop. We can expect the active listing inventory to drop slightly for the remainder of the year. Demand, the number of new pending sales within the past month, increased by 75 in the past couple of weeks to 3,241, a 2% increase. Last year’s demand was 684 fewer and two years ago was 1,946 fewer. The expected market time for all of Orange County decreased in the past couple of weeks from 2.48 to 2.38 months. The expected market time last year was at 5.18 months and two years ago it was at 13.31 months. For homes priced below $1 million, the expected market time is 1.87 months. For homes priced above $1 million, the expected market time is 8.79 months. That range represents 27% of the active listing inventory, but just 7% of demand. For only the second time this year, the number of distressed properties on the market increased. The distressed inventory increased by 73 homes, or 3%. 32% of the active inventory is distressed compared to 44% last year. There are currently only 339 foreclosures in all of Orange County, an increase of 25 in the past two weeks. Foreclosures only represent 4% of the active listing market and have an expected market time of 0.82 months. Last year the expected market time was at 1.22 months. Foreclosures continue to be exceptionally HOT and are, on average, selling for 3% above their asking prices. There are currently 2,123 short sales on the active market, an increase of 48 in the past two weeks. Short sales currently represent 28% of the active listing inventory. The expected market time for short sales is currently at 1.72 month versus 7.08 months one year ago (this number was grossly overstated as illustrated earlier). Homeowners with equity in their home now account for 68% of the current active inventory. If a buyer wants to avoid the many pitfalls of dealing with short sales and foreclosures, they should turn their attention to equity sellers.

Orange County Homes Gain Value

2009-10-29T10:40:00.000-07:00

House prices projected to jump 7.9% in a year
October 25, 2009
California may end up with third-highest appreciation rate in the nation.
By JEFF COLLINS
U.S. house prices will stop falling in March and are projected to be up 4.6 percent by
August 2010, Santa Ana-based data cruncher First American CoreLogic is predicting.
In California, the rate of appreciation will be even higher: up 7.9 percent from this
August. If true, California will have the nation’s third-highest appreciation rate, trailing
Maine (projected to be up 12.1 percent) and New Hampshire (up 11.6 percent).
Florida’s rate is projected to be fourth at 7.3 percent next August.
In addition, First American reported:
U.S. house prices dropped 10.1 percent this August compared with a year earlier.
California ranked fourth in price drops with a year-over-year decline of 12.9 percent in
August.
The biggest drops occurred in Nevada (down 24.4 percent), Arizona (down 19.5 percent)
and Florida (down 16.8 percent).
Excluding the sale of bank-owned homes and short sales, price drops were less severe.
U.S. prices for non-distressed homes were down just 6.2 percent.
In California non-distressed home prices were down 7.9 percent from August 2008.

Orange County Housing Report: Two Polar Opposite Markets

2009-10-20T13:44:00.000-07:00

October 15, 2009

With Halloween fast approaching, the differences between the lower end and higher end Orange County housing market are SPOOKY. It is extremely ironic that the general public expects a really soft real estate market with a lot of inventory and that buyers get to call all of the shots. That is entirely not true for homes priced below $1 million with an expected market time of only 1.88 months. That translates to an incredibly HOT seller’s market. That range represents 71% of the current active listing inventory. The upper range, homes priced above $1 million, represents 29% of the active listing inventory, but has an expected market time of 10.37 months. Anything over 10 months is basically an almost frozen market, a deep buyer’s market. So, today’s Orange County buyers need to know that the lower the range, the hotter the market. From $750,000 to $1 million, the expected market time is 3.76 months, not incredibly hot, but not incredibly slow either. The word on the street is that there is not that much new, fresh inventory hitting the market, so if a great property comes on the market that is priced right, don’t expect it to last very long. Below $750,000 is crazy, and below $500,000 is just NUTS. That’s right, N-U-T-S!!! Tremendous competition, multiple offers, and selling prices close to or above the asking prices are the norm. This is where many who have not experienced the Orange County housing market by sitting in a car and touring the few homes on the market within their areas of interest simply will not believe me. So, if you are in doubt, take a look around for homes in the lower ranges. The hot market is a reality. The homes that do not sell are overpriced, in poor condition or are in a poor location. It is not just distressed homes that are selling. 50% of demand, the number of new pending sales during the past month, is sellers with equity in their homes. Homes that are priced right are selling and selling fast. The sales to list price ratio for homes priced below $1 million is 99%. That means that on average, homes are discounted by only 1% off of their asking prices. For homes priced below $500,000, the sales to list price ratio is 100%, meaning that, on average, they are selling for their full asking price. That should be the headline in local newspapers and the topic for the nightly news: “Most homes in Orange County are selling for their asking prices and they are selling fast!” Let me clarify one important point though, the lower ranges are experiencing a seller’s market, but are not experiencing appreciation. Prices have stabilized because there is just too much demand. But, with so many distressed properties still in the mix and many appraisal issues, prices are not going up. With the government’s changes to the appraisal process, known as “The Home Valuation Code of Conduct,” more and more homes are not appraising for the agreed upon purchase prices. The government had the right intention, but I can write a book as to how the code of conduct has made the housing recovery process much more challenging. When an appraisal comes in too low, the buyer, the seller, or a combination of the two, makes up the difference, OR the pending sale falls apart and the home is placed back on the market.

Now, let’s take a closer look at the upper ranges. Homes above $1 million may represent 29% of the active listing inventory, but they only represent 7% of demand. As is customary, the higher the range, the slower the market. In this downturn it is even more pronounced. The sales to list price ratio in the upper range is 92%. That takes into account the LAST list price after many price reductions. The sales to ORIGINAL list price ratio is 85%. This vast discrepancy is due to unrealistic expectations on the part of sellers within the higher ranges and illustrates the need to carefully price a home based upon recent sales activity, 90 days or sooner is preferable, and all pending activity. Sellers in the upper ranges should not fall into the trap of giving too much weight to active listings. In this market, a buyer is not going to take into consideration another active listing that has sat on the market for months in coming up with an offering price. Appraisers are not going to give active listings much credence either. The market is so slow in the upper ranges that a great price, super condition and a great location still may equate to a long market time. Demand is just too low, so sellers need to pack their patience and enjoy the ride; this may take a while.

So, how do the rest of the numbers look? So, how do the rest of the numbers look? The active listing inventory increased by just six homes within the past couple of weeks, remaining under the 8,000 mark and totaling 7,923. That’s 4,799 fewer than last year and 9,836 fewer than two years ago. Ask any agent and their number one complaint is a lack of inventory in the lower ranges. Demand, the number of new pending sales within the past month, dropped by 73 in the past couple of weeks to 3,197. Last year’s demand was 524 fewer and two years ago was 2,022 fewer. The expected market time for all of Orange County increased slightly in the past couple of weeks from 2.42 to 2.48 months. The expected market time last year was at 4.77 months and two years ago it was at 14.73 months.

The number of distress properties on the market increased for the first time since November of 2008. Within the past couple of weeks the number of foreclosures and short sales increased by 52, now totaling 2,398, returning to early September 2009 numbers. 30.3% of the active inventory is distressed compared to 42.9% last year. There are currently only 322 foreclosures in all of Orange County, an increase of two in the past two weeks. Foreclosures only represent 4% of the active listing market and have an expected market time of 0.67 months. Foreclosures are HOT and are, on average, selling for 4% above their asking prices. There are currently 2,076 short sales on the active market, an increase of 77 over the past two weeks. Short sales currently represent 26% of the active listing inventory, a major player in today’s marketplace. The expected market time for short sales is currently at 1.82 month versus 6.08 months one year ago. Short sales are also a hot segment within the marketplace; however, buyers should not expect instantaneous results and quick closings. Short sales must wait for “lender approval,” which can take anywhere from weeks to months.

Copyright 2009 - Steven Thomas, Altera Real Estate - All Rights Reserved. This report may not be reproduced in whole or part without express written permission by author.

Orange County Housing Report: Top 10 OC Housing Trends

2009-09-21T14:34:00.000-07:00

September 17, 2009

Even though the kids have gone back to school, the Orange County housing market has not really changed much over the course of the past several weeks. It is a good time to take a look at the broader market and pinpoint the latest trends. Here’s a breakdown of the top 10 current Orange County housing market trends (in no particular order):

1. Below $750,000 is technically a seller’s market with an expected market time of approximately two months or less. The activity below $500,000 is incredibly hot. However, this is not a conventional seller’s market as values are not appreciating. The sheer numbers of distressed properties, mainly short sales, is keeping a lid on any appreciation. Buyers can expect multiple offers, a tremendous amount of competition, and the need to write offers to purchase on more than one property (often times several).

2. The listing inventory has been dropping all year and is now just above the 8,000 mark at 8,064. We started the year at 11,842 active homes on the market. One year ago there were 5,110 additional homes on the market and two years ago there was more than double today’s numbers. In the lower price ranges there is not a lot of new inventory coming on the market.

3. Cash is king and so are buyers with larger down payments. With so much competition in the lower ranges, buyers with very little down are having a hard time purchasing. They are losing out to buyers that can afford larger down payments. Many first time home buyers who are relying on the low down payments allowed by FHA financing simply cannot compete with more qualified buyers and investors. That’s right. Investors are back and taking away the ability for a lot of buyers to purchase.

4. Foreclosures are EXTREMELY hot. There are currently only 334 active listings that are foreclosures in all of Orange County, representing 4.1% of the total inventory. The expected market time for foreclosures is 0.66 months, or between two and three weeks.

5. The average sale to list price ratio for foreclosures over the past three months is 103%. That means that, on average, foreclosures are selling for 3% above the list price. The sale to list price ratio for short sales and equity sellers is 98%. And, if there weren’t so many appraisal issues, those numbers would be even higher. Buyers in the lower ranges should not expect to offer that much less than the asking price.

6. Prices are not dropping in the lower ranges, but they are in the upper ranges above $1 million. The higher the price range, the higher the expected market time with less and less demand. 30% of the active inventory can be found above $1 million, yet the higher end represents only 7% of demand.

7. The rumors of a foreclosure moratorium have been rampant all year long. There is truth to the moratorium, but it does not look like there will be a substantial increase in the number of foreclosures to hit the market until the first quarter of 2010. Also, there is a tremendous amount of pent up demand where just about every agent has pockets filled with buyers who are actively looking, but, surprisingly, there just is not a lot of fresh inventory. Any increase in foreclosures will most likely be offset by pent up demand.

8. With pressure from the federal government, lenders are moving more and more towards short sales. We can expect within the coming weeks for the Obama administration to announce something along these lines. Currently most short sales, where home owners owe more than their homes are worth, take a very long time to obtain lender approval, delaying the ultimate close of escrow. Lenders are creating procedures to speed up the process. Short sales are a better route than foreclosures because they are in much better condition and save the lenders a lot on repairing and carrying costs. There are currently 2,050 short sales on the market with an expected market time of 1.58 months, much different than just one year ago when there were 4,422 short sales with an expected market time of 6.2 months.

9. There are currently more distressed sales within the upper ranges. Last year only 6.5% of all distressed properties were above $750,000. Today, 11.4% of all distressed properties are above that mark. The upper ranges are not immune to distressed sales. More and more prime borrowers are having trouble paying their mortgages. A contributing factor to this trend is the increase in unemployment and the falling of property values where more and more borrowers are upside down in their homes.

10. The total pending sale count , not just a snapshot of the past month (what I refer to as demand), has steadily increased by 56% over the last year. It is taking longer to close pending sales primarily because there are a large number of short sales that are waiting on lender approval; thus, the count has really blossomed. There are now 6,851 total pending sale versus 4,393 one year ago.

Here’s a breakdown of how the numbers look this week: the active listing inventory dropped by 298 homes in the past two weeks to 8,064, its lowest level since January of 2006. Demand, the number of new pending deals over the prior month, increased by 61 in the past two weeks to 3,464. Last year’s demand was at 2,974, 490 fewer than today, and two years ago, it was at 1,180, 2,284 fewer than today. The expected market time is currently at 2.33 months, a slight change from the 2.46 month mark two weeks ago. The number of distress properties on the market dropped by 132 homes in the past two weeks, now totaling 2,384. 29% of the active inventory is distressed compared to 43% last year. There are currently 2,050 short sales on the active market, a drop of 134 over the past two weeks. The expected market time for short sales is currently at 1.58 months.

Orange County Housing Report: End of Summer Cycle

2009-09-11T09:26:00.000-07:00

September 3, 2009

As the end of summer fast approaches, the Orange County real estate market continues to follow its normal, cyclical path. The active listing inventory continues to drop, demand drops slightly and the expected market time has very little movement. This is typical for this time of year.

Here’s a breakdown of how the numbers look this week:

· Active listing inventory dropped by 169 homes in the past two weeks to 8,362, its lowest level since the beginning of 2006.
· The active inventory last year was at 13,582, 5,220 additional homes.
· The active inventory two years ago was at 17,760, 9,398 additional homes.
· Demand, the number of new pending deals over the prior month, dropped by 103 in the past two weeks to 3,403.
· Last year’s demand was at 2,847, 556 fewer than today.
· Two years ago, demand was at 1,206, 2,197 fewer than today.
· The expected market time is currently at 2.46 months, a slight change from the 2.43 month mark posted two weeks ago.
· The current expected market time is within the definition of a seller’s market, below five months. There is tremendous demand for homes priced below $750,000. Below $500,000, the market is extremely hot. Homes are receiving tremendous activity with multiple offers and an average list to sales price ratio of 100%. Even though we are currently experiencing a seller’s market, property values are not appreciating. This is primarily due to the number of distressed properties on the market that continue to suppress values.
· The expected market time for properties priced between $250,000 and $500,000 is currently at 1.33 months, levels not seen since the incredible days of 2005. Ask any buyer looking for a home priced below $500,000 just how crazy the market has been and you will quickly find that they are writing offer after offer. Last week, one of our agents stated that his buyer was finally in escrow after writing their fifth offer.
· Buyers today do not know how crazy the market is until they lose out on a property or two, learning from the good ol’ school of hard knocks. This is contrary to their perception of the housing market out of the gates due to the constant stream of press on the recession, unemployment and distressed homeowners.
· The current Orange County housing market is controlled by lenders, where just about half of all pending deals are either a short sale or foreclosure.
· The number of distress properties on the market dropped by 43 homes in the past two weeks, now totaling 2,516. The total had stopped its drop two weeks ago. I thought that the number would increase today. The pace in the drop has slowed over the past month, so it will be interesting to see where we go from here.
· 30.1% of the active inventory is distressed. That’s far different compared to last year when 42.3% of the inventory was distressed.
· There are currently only 332 foreclosures on the active market, an increase of 13 over the past two weeks.
· The expected market time for foreclosures is currently at 0.71 months, a deep seller’s market.
· There are 2,184 short sales on the active market, a drop of 56 over the past two weeks.
· The expected market time for short sales is currently at 1.80 months.

What can buyers expect going into the Autumn Market? Interest rates dropped and remain extremely low. Demand is still extremely hot for homes priced below $750,000. There has been a lot of news regarding the end of the $8,000 first time tax credit, which currently ends with sales on November 30th. However, we can expect an extension to that program coming soon. We can also expect a second extension to the increased conventional loan limit, for Orange County it is $729,750. The government does not want to see a decrease in the current real estate market momentum, and these two programs have helped immensely. So, even though we are entering a cyclically slower time of year, do not expect that much of a change in the current market. There are still droves of buyers still looking for homes. The word out on the street is that agents have pockets filled with buyers and not enough new inventory coming on the market. Any increase in fresh inventory would be welcomed by buyers and their agents alike. However, there just won’t be a lot of new inventory to hit the market until after the New Year. The upper price ranges are experiencing less demand. Lack of financing and the recession are not helping. But, the distressed inventory within the upper ranges is definitely fueling some demand.

Orange County Housing Report: A Normal Summer Cycle

2009-08-24T16:13:00.001-07:00

August 20, 2009

As summer winds down, not much has changed in the past two weeks in terms of the Orange County real estate market. The active inventory continued its drop since March of this year by shedding an additional 150 homes, bringing the total number of homes on the active market to 8,531, a 2% drop. It is hard to believe that just two years ago the inventory had swollen to 17,881, more than double today’s count. The active market has been dropping because there is tremendous demand in the lower ranges. The expected market time has dropped from 2.50 months two weeks ago to 2.43 months. That means that the average home in Orange County is expected to change to a pending status in less than 2.5 months. In my last report two weeks ago I referred to the market as a seller’s market within the lower ranges. I had radio and newspaper reporters calling me because I stated that we are in a seller’s market, sort of. As I pointed out in the last report, even though we are experiencing a seller’s market, meaning buyers can expect a lot of competition and sellers that price their homes appropriately will sell their homes quickly with multiple offers to choose from, prices are NOT appreciating. Why not? Because we are currently experiencing a lender controlled seller’s market. Short sales, which are subject to lender approval, and foreclosures, which are lender owned properties, currently have a monopoly on the market. Typically distressed properties are not placed on the market higher than the last comparable sale. And, 54% of active listings below $500,000 are distressed properties. Besides distressed homes fueling demand in the lower ranges, the ability to obtain financing under the conventional loan limit of $729,750 also pumps up demand. Everything above that limit is considered a jumbo loan where tighter financing requirements and higher interest rates keep a lid on demand within the upper ranges. Until the requirements ease, the upper ranges will continue to experience a sluggish market. The higher the price range, the slower the market. Just take a look at homes priced above $4 million. There are 407 homes on the market with demand, the number of new pending sales within the last month, at only 8 homes. At that pace, it would take a very long time to exhaust the current inventory. Compare that to homes priced from $250,000 to $500,000, where there are 2,031 homes on the market and demand is at 1,522. At the current pace, it would take only 1.3 months to exhaust the current supply. Yes, the market is hot in the lower ranges and buyers that just enter the market are consistently dumbfounded with all of the competition and the need to write offer after offer. No, values are not on the rise, even with incredible demand. Buyers just don’t yet want to pay more than the last buyer that did one month ago. Values are also not falling within the lower ranges like they have in the past as well, there’s just too much competition. The average sales to list price ratio for homes priced below $500,000 is 100%, meaning that sellers (and many of them are lenders) are obtaining their full asking prices.

So, how do the rest of the numbers look? Orange County total demand is currently at 3,506, an increase of 35 pending sales within the last two weeks. Last year demand was at 2,991. Cyclically, demand is hottest in June, drops in July, and resurges a bit in August. This year is no exception. From here, we enter the Autumn market where kids go back to school and demand tends to slowly drift downward. It will slow to its lowest levels of the year during the Holiday market, from Halloween through the first few weeks of the New Year.

How do the distressed numbers look? For the first time this year, the total number of distressed homes on the active market did not drop. It did not go up either. Instead, the distressed inventory remained unchanged over the past two weeks at 2,559. From here, as we enter into the slower seasons of the year, we can probably expect an increase in the distressed inventory. How much will it grow is anybody’s guess. All year we have been hearing about foreclosures moratoriums, moratoriums ending and a wave of foreclosures to come. However, the word on the street is that every agent has pockets filled with buyers waiting for new inventory to hit the market. So, there will still be plenty of demand even with an increase in foreclosure activity. Buyers should remember that interest rates are still at very low levels and that there is not going to be a lot more depreciation in the lower ranges. Higher rates are very likely to follow any sense of stabilization in the economy or if inflation gets out of hand. As rates rise, affordability drops. This fact is often ignored in the home buying process. We started off this decade with rates at 8%. Even if values dropped an additional 15%, at an 8% interest rate the payment would actually be more than purchasing at today’s values and interest rate. The total number of foreclosures on the active market has increased by 20 homes within the last two weeks and now totals 319. Demand for foreclosures is robust at 515 pending sales and the expected market time is only 0.62 months, still sizzling. The total number of short sales on the active market dropped by 20 homes to 2,240, with demand at 1,190 and an expected market time of 1.88 months.

If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Orange County Housing Report: Demand is Up and Supply is Down

2009-08-10T10:16:00.000-07:00

August 6, 2009

As is typical for this time of year, demand increased a bit at the beginning of August; however, the continuous drop in the active listing inventory is far from ordinary. Inventories have been dropping across the nation and Orange County is no exception. Since March of this year, the active inventory has been steadily dropping. The inventory has shed 2,925 homes since then, a 25% drop. Currently at 8,681 homes, that is far fewer than the 14,348 last year or 17,611 two years ago. So, what’s going on? Prices are down, interest rates are down, affordability is up and demand is up. All of these forces together have been pulling the inventory down. Throw in the fact that discretionary homeowners are only placing their homes on the market if they have to and are motivated to do what it takes to compete in this market. Demand, the number o f new pending sales within the past month, is currently at 3,481, an increase of 165 pending sales within the last two weeks. Last year demand was at 2,940. So, with an increase in demand and a lower inventory, the market has heated up. The expected market time for all of Orange County is currently at 2.5 months, technically a seller’s market. The lower the range, the hotter the market. All ranges below $1 million are pretty hot, but homes priced below $500,000 are sizzling. The expected market time for homes priced between $250,000 and $500,000 is currently at 1.30 months. For detached homes within that range, the expected market time is only 1.02 months. When the expected market time drops to such low levels, sellers are busy sorting through multiple offers and buyers are writing offer after offer with no luck. I have been asked many times why the market is not appreciating given all of the activity. The devil is in the details. Even though the distressed inventory has been dropping and now represents 29.5% of the current active inventory, 50% of current demand is distressed properties. With so many short sales and foreclosures driving demand, these distressed sellers are keeping a lid on any price appreciation. But, don’t misinterpret me. There may be a lid on appreciation, but in the hotter areas and price ranges there is also a lid on price depreciation. Values have fallen significantly since the start of this downturn, fueled by a consistent supply of distressed properties. So, current values have reached affordable levels where it makes sense again to own versus rent. First time home buyer activity has returned with a vengeance as well. Throw in the return of investor activity and it is no wonder that demand has increased this year.

How do the distressed numbers look? First off, the “next wave” of foreclosures that we have been hearing about since the beginning of the year still has not materialized. I have been hearing from industry experts and agents alike that the next wave is still coming. I am certain that they are right to a degree, that the distressed numbers will increase, just not at the great numbers that they are anticipating. The agents on the streets are telling me that they all have pockets full of buyers waiting for the right property to come onto the market and they all would love a “foreclosure deal.” This is where pent up demand really does exist. Any surge in foreclosures would be met with buyers in waiting. We can expect a lot of competition and continued multiple offers for some time to come. There are currently only 2,559 distressed homes on the market, a drop of 57 in the past two weeks. This is the lowest drop in the distressed inventory since February of this year. Could we be reaching a plateau before the overly predicted wave to come? Only time will tell. There are only 299 foreclosures currently on the active market with demand at 590, representing an expected market time of .51 months. That’s correct, two weeks. Foreclosures are so incredibly hot that they can generate 20 plus offers. Yet, only one gets the property. Demand is plentiful, there just is not enough supply. There are 2,260 short sales on the active market with demand at 1,145 and an expected market time of 1.97 months.

If you are a buyer, how should you respond to this market? First, please throw out the notion that there is no competition and that you can write an offer for thousands less than the asking price. The sales to list price ratio for homes priced below $500,000 is 100%. That means that, on average, homes are selling for their full asking price. For all homes in Orange County, the sales to list price ratio is 98%. Remember, homes have already dropped 30% or more in value. As a buyer, do NOT write an offer for 10% or more off of the asking price with a letter detailing that the housing market is currently in a declining market. These buyers feel that the ultimate sales price should reflect a future drop in values. That notion of purchasing is ludicrous. Industry experts and economists cannot accurately determine future prices and are constantly revising their estimates. The values are already highly discounted over the past few years. Arriving at the fair market value includes taking into consideration pending activity, recent sales (within the prior 90 days), property condition, seller motivation and circumstances, location, upgrades, lot size and amenities. To rely on Zillow.com or other online valuation tools is also absurd. These tools only take into consideration property size and sales price, ignoring all of the other factors that are used to arrive at price. There has been a lot of pressure on interest rates to move higher. Gone are the days of interest rates below 5%. As interest rates rise, affordability drops. In purchasing today, the monthly payment is approximately the same as a home purchased later with a drop of 10% in value and a 1% rise in interest rates. These historically low interest rates are not here to stay. How long they remain low is anybody’s guess. Last, buyers should only purchase in today’s market if and only if they plan on living in their home for years to come. In the long run, Orange County housing has proven to be an excellent long term investment. It is also a great place to call “home.”
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Orange County Housing Report: Foreclosures and Short Sales are Still Dropping

2009-07-27T16:29:00.000-07:00

July 23, 2009
The active distressed inventory, both foreclosures and short sales, has dropped by 56% since reaching its peak last summer. Based upon reports of the “next wave” of foreclosures, I have been expecting the distressed inventory to increase for the past couple of months. But, the wave just has not materialized yet. The distressed inventory dropped by another 150 homes in the past two weeks, bringing the total to 2,616 active on the market today. It now represents 29% of the overall active inventory versus 40% one year ago. It is 3,334 less than the peak of 5,950 on August 7, 2008. Back then there were 1,249 foreclosures within the active listing inventory. Today, that number has dropped to 331. Demand, the number of new pendings sales within the last month, for foreclosures is currently at 614, compared to 861 last year. The problem right now is that there is tremendous demand for foreclosures, just not enough new foreclosures hitting the market. The expected market time currently is .54 months, about two weeks, compared to 1.42 months last year. The rumor mill is rampant with reasons for the shortage of foreclosures: from lenders purposefully holding back their inventory to “it’s just a matter of time” to all of the new tenant foreclosure laws. The fact remains that the “next wave” just has not materialized. Another answer could lie in the fact that there are more short sales that are resulting in a pending sale. The active short sale inventory peaked in May of last year at 4,810. Today, there are 2,285 short sales within the active listing inventory, a 52% drop from its peak. The word on the street is that lenders are “just starting to get it.” That does not mean that all short sales result in a sale and that the process has been simplified. It indicates that a bit of the reluctance to put together a short sale, on the lender’s part, has been lifted. Demand for short sales is now at 1,139 pending sales compared to 549 one year ago. Expected market time has dropped from 8.52 one year ago to 2.01 months today. Clearly the market has changed considerably over the past year for both foreclosures and short sales.
How do the rest of the numbers look? Demand, the number of new pending sales over the past month, dropped by only 53 homes over the past two weeks to 3,306, a 2% drop. Last year demand totaled 2,743 pending sales, 563 fewer than today. Two years ago there were 1,822, 1,484 fewer than today. The active inventory dropped slightly by 51 homes in the past two weeks to 8,895, a 1% drop. Last year the active inventory totaled 14,746 homes, 5,851 additional homes on the market compared to today. Two years ago the active inventory reached 17,596 homes, 8,701 additional homes compared to today. The expected market time for all homes in Orange County increased slightly over the past two weeks from 2.66 to 2.69 months. Last year the expected market time was 5.38 months and two years ago the expected market time was at 9.66 months. The total pending count, different than demand in that demand only tracks new pending sales over the past month, increased by 116 homes over the past two weeks to 6,519, its highest level since I began tracking the statistic back in 2007. Last year at this time the total pending count was at 4,192, 2,211 fewer than today. Two years ago there were 2,575, 3,944 fewer than today.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Increased Conventional Loan Limit to stay

2009-07-22T10:36:00.000-07:00

The House Appropriations Committee approved a bill that will keep the increased conventional loan limit of $729,750 through September 2010. That is great news. We will not have to deal with the same hiccup of the limit dropping like it did at the beginning of the year (which lasted several months). Here’s a link to the article: http://mortgage.freedomblogging.com/2009/07/20/house-committee-votes-to-extend-home-loan-limits/14109/

Orange County Housing Report: A Seasonal Summer Drop in Demand

2009-07-17T11:08:00.000-07:00

July 9, 2009

While celebrating the 4th of July and enjoying the warm weather and California surf, demand for Orange County homes dropped by 7%, a typical drop for this time of year. The average drop in demand over the past five years has been 8%. This year is no exception. Demand, the number of new pending sales over the past month, dropped from 3,629 pending sales two weeks ago to 3,359 today, a drop of 270 homes. Last year the drop was 324 homes and demand totaled 2,682 pending sales, 677 fewer than today. Two years ago there were 1,578 fewer pending sales compared to today, totaling only 1,781 for all of Orange County. Over the past five years, demand cyclically increases over the next two weeks, averaging an increase of 4%. The active listing inventory dropped to below the 9,000 mark for the first time since February 2006. The inventory dropped by 242 homes in the past two weeks from 9,188 to 8,946, a 3% drop. From the first of the year, when the active inventory totaled 11,842, the inventory has shed a total of 2,896 homes. Last year the active inventory totaled 14,701 homes, 5,755 additional homes on the market compared to today. Two years ago the active inventory reached 17,334 homes, 8,388 additional homes compared to today. Even though demand dropped, the expected market time did not increase that much because of the drop in inventory. The expected market time increased from 2.53 two weeks ago to 2.66 months today. Most buyers have the expectation of a deep buyer’s market where they can take their time and write an offer to purchase a home well below the asking price. With so much negative news swirling around the economy, the recession, employment and the housing market, it is ironic to find that homes priced below $1 million are experiencing tremendous competition and often sell for at or above the asking price. The lower ranges are incredibly hot too. From $250,000 to $500,000, the hottest price range, the expected market time is 1.44 months. That range represents 24% of the current active inventory and 45% of demand. 55% of the active inventory within that range is either a foreclosure or short sale. Buyers are looking for a deal and are looking for foreclosures. 72% of all distressed sales are found below $500,000. It is reasonable to conclude that distressed sales are fueling the market, especially in the lower ranges. Total pending count, different than demand in that demand tracks new pending sales over the past month only, dropped for the first time this year by 54 homes, now totaling 6,403. Last year at this time the total pending count was at 4,192, 2,211 fewer than today. Two years ago there were 3,797 fewer than today.

The active distressed inventory, both foreclosures and short sales, continued its decent, dropping from 2,919 homes to 2,766, a 153 home drop. Foreclosures make up 13.5% of the distressed inventory. There are only 374 in all of Orange County. The other 86.5% are short sales, totaling 2,392. Foreclosures make up only 4.2% of the TOTAL active inventory and 26.7% are short sales. Foreclosures make up 17.7% of demand and short sales make up 35.4%. With so many buyers looking for a deal, many are turning to foreclosures only to find that there is just way too much demand and competition. They fly off the market as quickly as they come on. The expected market time for foreclosures is only .63 months, between two and three weeks. The expected market time would probably be even less, but it takes a bit of time to sort through multiple offers and communicate with the out of area banks. The number of short sales on the active market has dropped to 2,392, 115 fewer than two weeks ago and 50% off of the peak of 4,810 established in May of 2008. With so few foreclosures on the market, many buyers have turned to short sales where the competition has grown substantially and the expected market time has dropped to 2.01 months. Short sales have become an acceptable alternative to both buyers and lenders alike. Not only have buyers jumped on the short sale bandwagon, but lenders have approved more and more short sales in lieu of the lengthy foreclosure process. One year ago 94% of all distressed listings were at or below $750,000. Today, 88% is found below $750,000, dropping from 89% two weeks ago. The trend is more and more distressed homes are found above the $750,000 mark as the market moves from the subprime fallout to prime loans. The upper ranges are just beginning to catch up to the lower ranges. We have all read or heard about the foreclosure wave to come. It will not manifest itself in an increase in short sales. When more foreclosures do hit the market, there is so much pent up demand for the foreclosure “deal” that many will become pending sales just as fast as they are placed on the market. The reports from agents on the streets are that they are all working with buyers and they all would love to jump on the next foreclosure to hit the market.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Orange County Housing Report: More of the Same

2009-06-30T16:05:00.000-07:00

June 25, 2009
The active inventory dropped slightly along with demand. It seems as if the Orange County marketplace has reached a plateau. The active listing inventory dropped by 125 homes in the past two weeks and now totals 9,188, the lowest level since February of 2006. Today there are 5,652 fewer active listings on the market compared to last year when the inventory totaled 14,840. There are 8,062 fewer active listings compared to two years ago when the inventory totaled 17,250. After reaching its height for 2009, demand, the number of new pending sales over the past month, dropped by 23 homes in the past two weeks and now totals 3,629. There are 623 additional pending sales today compared to last year’s demand level at this time. Compared to two years ago, there are 1,735 additional pending sales today. Typically at this time of year demand reaches a plateau and begins to drop a bit in July before increasing one last time for the year in August. The strongest demand is currently for single family residential homes priced below $500,000. The expected market time is a little over a month, indicating high demand, multiple offers and a seller’s market. If you are a homeowner reading this and think this would be a great time to jump in, a lot of that demand is fueled by distressed properties within that range. For detached homes priced below $250,000, there are only 160 in all of Orange County, 81% are distressed. For homes priced between $250,001 and $500,000, there are 1,004 within the range, 67% are distressed. Distressed homes are priced well and are often priced below the last comparable sale. If a homeowner with equity wants to compete, they better bring a sharp pencil in arriving at the asking price. Yes, there is a lot of demand; however, buyers are very educated and are unwilling to pay much of a premium in the current market.

The expected market time dropped slightly from 2.55 months two weeks ago to 2.53 months today. The expected market time last year was at 4.94 months, and two years ago it was at 8.5 months. The last time the expected market time was at this level dated back to September 2005. Total Orange County pending sales continued its ascent, reaching a record height, totaling 6,457, a 109 home increase over the past two weeks. Compared to last year at this time when total pending sales reached 4,363, there are 2,094 additional pending sales today. Two years ago it was at 2,816, 3,641 fewer compared to today. Total pending count is different than demand because demand tracks new pending sales over the past month. Total pending count takes into account all pending sales, including those that have been pending for longer than 30-days.

There are currently 2,919 distressed homes on the active market, a drop of 143 in two weeks and 51% off of the peak of 5,950 established in August 2008. The number of active foreclosures has dropped to 411 for all of Orange County, a drop of 4 homes in the past two weeks and 71% off of the peak of 1,404 established in November of 2008. With so many buyers looking for a deal, many are turning to foreclosures only to find that they are flying off of the market just as quickly as they are coming on. The number of short sales on the active market has dropped to 2,507, 155 fewer than two years ago and 48% off of the peak of 4,810 established in May of 2008. In the past two weeks, the number of short sales has dropped by 539 homes. Distressed sales account for 32% of the active listing inventory and 52% of demand, a slight drop from two weeks ago. The expected market time for foreclosures is currently 0.62 months. Last year there were 1,171 foreclosures and an expected market time of 1.32 months. For short sales, the expected market time is 2.03 months. Last year there were 4,789 short sales on the market and an expected market time of 7.21 months. It is simple to conclude that short sales have become an acceptable alternative to both buyers and lenders alike. It not only takes demand to move the short sale inventory, it takes lenders’ acceptance of a payoff that is less than the loan amount. One year ago 94% of all distressed listings were at or below $750,000. Today, 89% is found below $750,000. There are more distressed listings found above $750,000 today compared to last year, indicative that the current downturn is not just isolated to the lower ranges.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Just Reduced!

2009-06-22T12:27:00.000-07:00

25082 Danacoral, Dana Point
$665,000
3 Bedroom, 2 Bath
Single Level

Situated in Danawoods with community pool, park and playgrounds.

Call Dianna and Brian McGarvin of Altera Real Estate for a private showing.
949-370-2652

South Orange County Sees yearly gains

2009-06-19T16:49:00.000-07:00

The newest homebuying stats for the 22 business days ending May 20 from DataQuick, a market analyzing tool, show that Dana Point, San Clemente and Laguna Beach ZIP codes saw an increase in sales over last year. Dana Point's 92624 was up 16.7 percent with 7 sales and 92629 was up 50 percent with 33 sales. San Clemente's 92672 saw an increase of 29.2 percent with 31 sales and 92673 increased by 11.47 percent with 39 sales. Laguna Beach's 92651 also increased with 53.8 percent gain from 20 sales.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Just Reduced! Open Saturday June 13th 1-4PM

2009-06-11T13:36:00.000-07:00

1408 Avenida Tranquilla
San Clemente, CA 92672

5 Bedroom, 3 Baths
3 Car Garage
Gorgeous upgrades throughout]

$785,000

Orange County Housing Report: The Distressed Inventory is Dropping

2009-05-04T13:26:00.000-07:00

April 30, 2009

The total number of distressed properties, foreclosures and short sales, dropped to its lowest level since December 27, 2007. There are currently 3,724 distressed homes on the active market, 37% off of the peak of 5,950 established in August 2008. The number of active foreclosures has dropped from its November 2008 peak of 1,404 to 529, a 62% drop. It is not just the number of foreclosures that has been dropping; the number of short sales on the active market has dropped by 20% since February, from 4,009 to 3,195. This drop can be directly attributed to much stronger demand for homes priced below $1 million, which accounts for 74% of the active inventory and 95% of demand. Homes above $1 million account for 5% of demand, but 26% of the active inventory. Demand has been incredibly strong in the lower ranges because of two factors: 96% of all distressed properties are found below $1 million; and, jumbo loans, loans above $729,750, are much harder to obtain than conventional loans, loans below that level.

For Orange County, demand, the number of new pending sales over the prior month, increased by an additional 79, now totaling 3,632 and the current height of demand for 2009. Orange County demand has not been at this level since August of 2005, just prior to the beginning of the current cycle. Last year there were 1,092 fewer pending sales, totaling 2,540, 30% less. Two years ago demand was 1,769 fewer, totaling 1,863, 49% less. Three years ago demand was 26% less and totaled 2,701. The recent surge in demand seems to be abating, but this can be attributed to less inventory in the lower ranges. With an expected market time of 1.73 months, the $250,000 to $500,000 range has been incredibly hot and many buyers have written offer after offer with no success. The sales to list price ratio for homes within this range is 100%. So, those buyers looking to scoop up a deal by writing for less than the asking price are, on average, out of luck. The sales to list price ratio for foreclosures within that range is 101%.

The active listing inventory dropped 198 homes in the past two weeks to 10,363. The inventory has not been at these levels since April 2006. At the start of the year the active inventory was at 11,842, 1,479 additional homes compared to today. Last year there were 15,437 homes on the market, 5,074 additional homes compared. Two years ago there were 15,519 homes on the market, 5,156 additional homes. Three years ago there were 11,956 homes on the market, 593 additional homes compared to today. The expected market time dropped from 2.97 months two weeks ago to 2.85 months today. The expected market time last year was at 6.08 months, two years ago it was at 8.33 months, and three years ago it was at 4.43 months. This is the lowest expected market time since October 2005. Total Orange County pending sales continues its surge, reaching record heights for this three and one-half year downturn, totaling 5,733, an 828 home increase over the past month. Last year at this time, total pending sales reached 3,514, 2,219 fewer than today. Two years ago it was at 2,824, 2,909 fewer. Total pending count is different than demand because demand tracks new pending sales over the past month. Total pending count takes into account all pending sales, including those that have been pending for longer than 30-days. The 5,733 tabulation indicates that there will be a surge in sales over the next couple of months.
How should a buyer approach this market? Most buyers have the wrong expectations in approaching the Orange County real estate market. Everybody is acutely aware of the current global recession caused by the financial crunch, so it is understandable that today’s buyers want a deal when buying a home. However, buyers fail to consider two important aspects of the current real estate market: there is tremendous demand for lower priced homes and distressed properties; and, today’s asking prices already reflect a major drop in value. Prices have reached much more affordable levels just as interest rates have dropped to historical lows, the end result, demand not seen prior to the current downturn. So, buyers need to take a litmus test of the market that they are interested in. Buyers can expect multiple offers and even above asking price sales prices for homes priced below $500,000 and distressed homes. The market has heated up considerably for homes priced between $500,000 and $750,000 as well, with an expected market time of 2.49 months. The market is much stronger between $750,000 and $1 million too, with an expected market time of 4.95 months, considered a market in equilibrium. The incredibly hot demand has been underreported and most buyer have to learn the hard way before getting realistic, writing offers below the asking price and losing out on a property or two. Another reality of the current marketplace is the number of hoops lenders will put you through in funding a loan. Buyers will not only put together the initial loan package; more often than not, the lender is going to request additional paperwork during the pending sale process. As of May 1st, the government imposed an additional hurdle which will change the appraisal process. This new process has a very high potential in delaying the close of a pending sale. It is my humble opinion that these additional hurdles are necessary, but should be postponed until the market has healed. It is easy for politicians to make headlines and change the way lending and appraising is processed in the midst of a downturn, but the real fixes need to come when the market is moving on all cylinders.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Orange County Housing Report: The Spring Surge Continues

2009-04-19T18:03:00.001-07:00

April 16, 2009

Demand surged by 33% in the past month as the active listing inventory dropped by 9%. In turn, the expected market time for Orange County dropped from 4.35 months to 2.97 months. Typically in April, the Spring market picks up steam. However, the market has not been “typical” in years, at least not until this year. Demand has literally taken off over the past four weeks. It is almost as if somebody turned the demand switch to its “on” position. Can this be the stimulus package at work? Are the lower interest rates working? Could the recent uptick be attributed to pent up demand? Is the public at large feeling a little bit at ease given the recent improvement on Wall Street? It is most likely a little bit of everything at work. And, this recent trend is not isolated to just the OC; the entire Southern California market has experienced a 25% increase in demand and a 9% drop in inventory over the past month.
For Orange County, demand, the number of new pending sales over the prior month, increased by an additional 306, now totaling 3,553. This is the current height of demand for 2009, and who knows where it will go from here. The last time demand exceeded 3,500 dates back to August of 2005, just prior to the beginning of the current cycle. Last year there were 1,179 fewer pending sales, totaling 2,374, 50% less. Two years ago demand was 1,628 fewer, totaling 1,925, 85% less. Three years ago demand was 21% less and totaled 2,942. Demand has broken from a normal cyclical path and is currently marching to the beat of its own drum. The same happened for the first half of 2008, where demand continued to grow week after week, ignoring normal market gyrations. Demand followed the atypical seasonal ups and downs for the second half of 2008. So, where does demand go from here? We will all have to wait and see, knowing that there are still a lot of buyers actively looking.

Isn’t there going to be a wave of foreclosures coming on the market? I am often asked about a foreclosure moratorium or banks holding back on releasing foreclosures so that they do not saturate the market. First off, let’s understand the terms when discussing foreclosures. REO, bank owned and foreclosures are all the same thing. Some lenders prohibit the use of the term foreclosure or even bank owned; instead, settling on REO, “Real Estate Owned.” In my opinion, there is so much demand for foreclosures that if it were up to me, I would leverage the terms foreclosure and bank owned. Distressed properties also include short sales, where a seller owes more to a lender, or lenders, than a home is worth. In the case of a short sale, even with a successful negotiation between a buyer and seller, the sale is still subject to the lender, or lenders’, approval. Lenders cannot prevent homeowners from placing their homes on the market as short sales, where they owe more than a home is worth. They can hold up the approval process, but they cannot stop a seller from trying to sell and submitting an offer for the bank’s consideration. So, any moratorium or intentional, intermittent release of foreclosures, would only affect the number of foreclosures or investor bought foreclosures. Yes, investors have been buying, rehabilitating and flipping or buying, rehabilitating and renting, because the “numbers” look good again. Currently, only 15% of the active distressed inventory is a foreclosure. One year ago, it was at 20%. At its height, it was at 24%. Today’s active distressed inventory totals 4,006, a drop of 86 in the past two weeks. 613 of the 4,006 are foreclosures, meaning that the remaining 3,392 are short sales. Let’s just assume that the rumors are correct and that there had been a moratorium and that lenders were intentionally holding off foreclosures from the market. Even if the total surpassed the record mix of foreclosures, 24%, and rose to 30%, the total would only rise to 1,201, almost doubling from its current level. Yet, what everybody has failed to realize is that there is major pent up demand for foreclosures. Just ask any real estate agent or buyer that has written an offer on a foreclosure. You will quickly find that the norm is multiple offers, accepted offers at or above the list price, and losing property after property due to the bidding wars. This is a reality of today’s market that is most often misunderstood. When a buyers journey begins in today’s market, they have the expectations of isolating a foreclosure and getting a heck of a “deal” buy offering thousands, if not tens of thousands, less than the asking price. Buyers fail to consider that prices have already fallen between 30% to 40%. Almost all buyers have to learn the hard way about the realities of today’s market. There are 613 foreclosures in all of Orange County today and demand is at 938. The expected market time for foreclosures has dropped all the way down to .65 weeks, about a 19 day market, a deep, deep seller’s market. So, throw in even double the current number of active foreclosures and they will quickly be eaten up by the insatiable appetite for foreclosures. Given current demand, doubling the foreclosure inventory will increase the expected market time to 1.28 months, about 5 weeks, still a major seller’s market. The real story is that short sales are currently more successful than they were a year ago. Today there are 3,392 short sales on the active market and demand is at 1,106, representing an expected market time of 3.07 months. One year ago there were 4,379 short sales on the market and demand was at 444, representing an expected market time of 9.86 months. Some conclusions can be made based upon all of this data: foreclosures are hot; short sales are hot; expect a lot of competition; and, any increase in foreclosure activity will just help relieve current pent up demand.

So how do the rest of the numbers look? The active listing inventory shed 1,045 homes in the past month, a 9% decrease, now totaling 10,561. The inventory has not dropped below 11,000 since the beginning of April 2006. Last year there were 15,556 homes on the market, 4,995 additional homes compared to today. Two years ago there were 14,811 homes on the market, 4,250 additional homes. The expected market time dropped from 3.4 months two weeks ago to 2.97 months today. The expected market time last year was at 6.55 months, two years ago it was at 7.69 months, and three years ago it was at 3.83 months. This is the lowest expected market time since October 2005. There are 1,944 fewer distressed homes on the market compared to the August 2008 height, a 33% drop. The distressed inventory now represents 38% of the current active inventory, dropping from 40% a month ago. Total Orange County pending sales continues to reach record heights. I started tracking the statistic back in September of 2006. After increasing by 475 homes over the past two weeks and 830 over the past month, the total pending count has reached 5,308 pending sales. Last year at this time, total pending sales reached 3,924, 2,121 fewer than today. Two years ago it was at 2,824, 2,556 fewer.

There is a major difference between the lower and upper ranges. Every price range improved over the past two weeks with the exception of homes priced above $4 million. The expected market time for homes priced below $250,000 dropped to 2.23 months. For the hottest range, homes priced between $250,000 and $500,000, the expected market time is 1.8 months. We have not seen the market time below the two month mark since October 2005. For homes between $500,000 and $750,000, the expected market time has dropped to 2.82 months. This range has not seen these levels since February 2006. Between $750,000 and $1 million, the expected market time dropped below the six month mark for the first time since October 2008, now at 5.49 months. For homes between $1 million and $1.5 million, the expected market time dropped below ten months for the first time since October last year as well, now at 9.51 months. For homes priced above $1.5 million, the markets have improved, but still have expected market times in the double digits, stagnant markets. As the lower ranges improve and consumer confidence slowly emerges, the good vibes are starting to flow to the upper ranges. If the latest trends continue, a bottom could be reached in the upper ranges by the end of this year to the beginning of next year.

If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Just Listed!

2009-04-15T13:30:00.000-07:00

25082 Danacoral, Dana Point

3 Bedroom, 2 Bath, 2 Car Garage

$689,000

Rarely available single level home in Danawoods! Offering three bedrooms and two baths. Third bedroom currently used as office off master bedroom. Bright kitchen with high ceilings opens to family room with large breakfast counter. Living room offers fireplace and opens to dining room. Relax and unwind in the backyard with mature landscaping and fountain. Generous built-ins and bookshelves throughout. Garage features stairs leading to large storage area. The community of Danawoods offers a large park in the center of the neighborhood, community pool with adjacent playground, picnic tables and barbeques. Walk to Ocean Ranch shopping, dining and restaurants.

For more information or a private showing call Dianna and Brian McGarvin at 949.300.1600

Orange County Housing Report: Demand Suddenly Surges

2009-04-06T08:07:00.000-07:00

April 2,2009

Coinciding with a drop in interest rates and a Wall Street rebound, demand for Orange County housing increased by 22% in just two weeks. Demand, the number of new pending sales over the past month, increased from 2,670 pending sales two weeks ago to 3,247 today, a 577 home increase. Last year’s high of 3,060 pending sales was reached on June 12. Orange County demand has not reached this level since September 2005, the beginning of the current downturn. Last year there were 962 fewer pending sales, totaling 2,285, and two years ago there were 1,114 fewer,

totaling 2,133. The active listing inventory shed 580 homes in the past two week, a 5% decrease, totaling 11,026. The active listing inventory has not seen these lower levels since the beginning of April 2006. Last year there were 15,474 homes on the market, 4,448 additional homes compared to today. Two years ago there were 14,010 homes on the market, 2,894 additional homes. The expected market time dropped from 4.35 months two weeks ago to 3.4 months today. The expected market time last year was at 6.77 months, and two years ago it was at 6.57 months. This is the lowest expected market time since March 2006. The distressed homes inventory, foreclosures and short sales, dramatically changed over the past two weeks, dropping by 581 homes to 4,092. The height of the distressed inventory, 5,950, was achieved on August 7, 2008. There are 1,858 fewer distressed homes on the market compared to the height, a 31% drop. The distressed inventory now represents 37% of the current active inventory, dropping from 40% two weeks ago. Foreclosures now have an expected market time of 0.77 months, or three weeks. There are 170 fewer foreclosures on the market, totaling 731. Demand for foreclosures is at 953 pending sales. The foreclosure market is extremely hot. Buyers can expect to compete with multiple offers and sales prices above their list prices. The short sale inventory shed 391 homes in the past two weeks to 3,379 homes. The short sale inventory height, 4,701, was reached on August 7, 2008, coinciding with the total distressed inventory height. There are 1,322 fewer short sales on the market today. Demand for short sales increased by 205 pending sales, totaling 967. Since short sales are subject to lenders approval and are often not changed to pending status until lender approval is received, this may be a sign that lenders are gearing up to curb foreclosures through the accommodation of short sales. Total Orange County pending sales continues to reach record heights week after week. I started tracking the statistic back in September of 2006. After increasing by 355 homes over the past two weeks, the total pending count has reached 4,905 pending sales. Last year at this time, total pending sales totaled 2,852, 1,698 fewer than today. Two years ago it was at 3,047, 1,858 fewer.

Word within the trenches is that there is tremendous activity out there in the lower ranges and with distressed properties. Many buyers first enter the market with anticipation that they are going to somehow be able to obtain a property for tens of thousands less than the asking price. They are quickly learning that there is a lot of competition in the lower ranges and all distressed homes. There just is not enough news highlighting this aspect of the real estate market. The activity in the lower ranges has reached such a high level, that it is starting to reflect in the median sales price for Orange County, which posted its first month over month increase, from January to February 2009, in eight months. Lower interest rates, a lot of stimulus, the massive return of the first time home buyer, the return of investors, have all equated to a sharp uptick in the current Orange County real estate market.

There is a major difference between the lower and upper ranges. For all home below $750,000, the expected market time has been dropped considerably. The best range in Orange County is homes between $250,000 and $500,000, with an expected market time of 2.09 months. 60% of the inventory within that range is either a short sale or foreclosure. The expected market time for homes below $250,000 is 2.46 months. For homes between $500,000 and $750,000, the expected market time is 3.46 months. It shoots up to a 6.4 month expected market time for homes between $750,000 and $1 million. From there, the expected market time blossoms to a stagnant market. The expected market time ranges from 13.11 month, homes between $1 million and $1.5 million, and 43.44 months, homes above $4 million. What this helps illustrate is that the government’s focus on freeing up conventional financing, loans up to $729,750, is working within the real estate market. For jumbo financing, where loans are much more difficult to obtain and are at a higher rate, especially above $1 million, demand has just come to a crawl. With no focus from the government on higher ranges, it will not be until a bottom is reached in the lower ranges, which some are predicting during the second half of 2009, and confidence is restored in the financial markets, that decent demand will return to the upper ranges.

If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Orange County Housing Report: 21% Fewer Distressed Homes on the Market

2009-03-23T10:37:00.001-07:00

March 19, 2009

As the market marches forward, the distressed active inventory, both foreclosures and short sales, has dropped by 21% since its peak in August of 2008. There have been various explanations for a dip in the number of distressed sales, like legislation that lengthens the amount of time to file a notice of default (when somebody is behind on their mortgage) and ultimately delay foreclosure. The problem with that theory is that the distressed inventory has been steadily dropping for seven months. The distressed inventory has dropped by 1,277 homes, or 21%. On August 7, 2008, the distressed inventory was at 5,950 homes and represented 41% of the 14,348 total active inventory (both distressed and non-distressed listings). Today, the distressed inventory has fallen to 4,673, 40% of the 11,606 total active inventory. One year ago today, the distressed inventory was at 5,221, 548 more that today, the second report in a row with a year over year improvement. However, the distressed inventory is still extremely high. This inventory needs to drop significantly for the real estate market to start to appreciate once again. The rate that it drops is slow because of the number of bad loans in the system combined with a high unemployment. However, in the lower ranges, the rate of depreciation has slowed remarkably, and even bottomed in some areas. This is due primarily to the extremely high demand in the lower ranges, homes priced below $500,000. This range accounts for 49% of the total active inventory, but 73% of demand. There are some cities with expected market times close to two months, technically a seller’s market. A lot of this demand has been fueled by the drop in prices and the desire to acquire a bank owned, foreclosed home. Buyers looking for a home below $500,000 need to be prepared for a lot of competition. The average sales to list price ratio for foreclosed homes is 101%, meaning that, on average, the home is selling for above the list price. Short sales DOMINATE the distressed sales market within Orange County and account for 80.7% of all distressed homes. The other 19.4% are foreclosures, the hottest properties in the county. There are currently 905 foreclosures on the market and demand, the number of homes placed into escrow within the last month, is at 882 pending sales. The expected market time for foreclosure is 1.03 months. Foreclosures are so hot, that multiple offers are the norm. The demand is similar to 2005 demand for all homes, CRAZY seller’s market. Buyers in today’s market expect a discount and expect to be able to take their time in making a decision to write a purchase offer. Most buyers must learn the hard way, after losing a property or two, that these homes generate tremendous buyer competition. The expected market time for short sales has dropped significantly, now at 4.95 months, but this figure is grossly overinflated due to the nature of short sales. Short sales are where a homeowner attempts to sell their home, owing more than their home is worth. Even though most short sales have an agreed upon purchase offer between a buyer and the seller, most are continually marketed as an active listing rather than as a pending sale because of the belief by many that they do not have an official acceptance until the lender approves the sale at a discount in what is owed. In the trenches, agents are reporting that vast majority of short sales that are a part of the active inventory have offers that are already submitted to the lender(s). Another giant drawback to short sales is that the “lender approval” process can take weeks to months to obtain. Often, by the time a lender does approve of a short sale offer, the buyer has already moved onto another home. The bottom line, there may be a lot of distressed homes on the market, but as a buyer, expect a lot of competition.

So how do the numbers look? In the past two weeks, demand, the number of new pending sales within the prior month, increased by 46 pending sales to 2,670. Last year at this time there were 587 fewer pending sales, totaling 2,083. Two years ago there were 2,195 pending sales, 475 fewer than today. All of the recent stimulus aimed specifically at real estate should begin to trickle down into the Orange County real estate scene in the form of increased demand within the next couple of weeks. In the trenches, agents are already reporting increased buyer interest, increased open house activity and more buyers on the verge of writing after fence sitting for quite some time. All of the ingredients for an increase are there: historically low interest rates, government incentives to purchase now, and a lot of government intervention aimed at placing a sound bottom underneath the housing market. Prices, especially in the upper ranges, may continue to fall; however, what most buyers fail to consider is that these historically low interest rates will not be around forever. Instead, with all of the money that the federal government is pumping into our economy, the U.S. economy will most certainly endure a major increase in inflation down the road. The Federal Reserve responds to an increase in inflation with an increase in interest rates. In 1990, interest rates were thought to be at a great level when they broke just below 10%. At 5%, today’s approximate interest rate, the payment for a $500,000 loan is $2,684. At 7%, the payment is $3,327, an increase of $643 per month. At 10%, the payment would be $4,388, a difference of $1,704. Even if homes were to fall an additional 10%, a 7% loan at $450,000 would be $2,994, still $310 a month more than a 5% loan at $500,000. At 10% it would be $1,265 more per month. The beauty of homeownership in Orange County is it is an incredible long term investment. So, if you are a buyer and can live in your home for more than just a few years, ultimately it makes sense to buy as soon as you isolate the home that best fits your family’s criteria and budget. It may not pay to wait because after the economy turns around, inflation will increase interest rates. Almost all buyers fail to factor the negative effects of increasing interest rates, which can be profound.

The active listing inventory continues to remain relatively unchanged so far this year, increasing by only 65 homes over the past month, bringing the current total to 11,606. Last year the active inventory was at 15,617 homes, 35% higher. Two years ago there were 1,767 additional homes on the market, totaling 13,373, 15% higher. The current expected market time decreased slightly from 4.41 months two weeks ago to 4.35 months today. Last year the expected market time was 7.5 months. Two year ago the expected market time was 6.09 months. Total Orange County pending sales continues to reach record heights over the past two reports. I started tracking the statistic back in September of 2006. After increasing by 142 homes over the past two weeks, the total pending count has reached 4,550 pending sales. Last year at this time, total pending sales totaled 2,852, 1,698 fewer than today. Two years ago it was at 3,321, 1,229 fewer.

The condition of the Orange County real estate market really depends upon the price range. The story of 2009 remains the same, the lower the price range, the hotter the market. The hottest range is detached homes below $250,000 with an expected market time of only 1.94 months. However, there are only 303 detached homes in that range. The second hottest range is detached homes between $250,000 and $500,000, with an expected market time of 2.27 months. Here’s a breakdown of the year over year change in both supply and demand for Orange County’s various price ranges for both detached homes and condominiums:

It will be interesting to see the impact of all of the recent stimulus within the various ranges. We can expect the lower ranges to improve and eventually bottom first. It won’t be until confidence is restored in the financial marketplace, the current focus of the Federal Reserve, the Obama administration and Congress, that we will see a bottom in the upper ranges.

If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

The Federal Open Marketing Committee

2009-03-19T11:15:00.000-07:00

The Fed is clearly doing “EVERYTHING” it can to stabilize the housing market and head off a prolonged period of deflation that would be difficult to break.
Of particular note: The Fed is substantially increasing its support of mortgage lending and housing markets. The FOMC committed the Fed to buy an additional $750 billion in agency mortgage-backed securities, bringing its total purchases of these securities to $1.25 trillion this year.
Moreover, the Fed will increase its purchases of agency debt by $100 billion to a total of up to $200 billion. Both measures are designed to increase the ability of Fannie Mae and Freddie Mac to expand their balance sheet and reduce the cost of “conventional” mortgages.
If that wasn’t enough to get borrowers’ and lenders’ blood pumping, the FOMC threw in a kicker: they committed to buying $300 billion worth of long-term Treasury securities, an action they had signaled they were prepared to do at some time. This is huge in my opinion, perhaps the policy impact of greatest importance. The Fed is committing itself to monetizing the debt of the Federal government in order to push down general long-term interest rates and restart a refinancing wave. Given the reluctance of foreigners of late to finance our growing federal deficit, this will be a necessary step toward recovery. But the potential costs of this action are increasingly problematic. It is like a cancer patient that is given a heavy dose of chemo and radioactive therapy to cure their cancer, but the patient first appears to get sicker with each passing day. Renewed dollar weakness is likely. Longer-term, the U.S. economy could face higher inflation and higher interest rates down the road.
The FOMC also said it is likely to expand the range of eligible collateral for the Term Asset-backed Lending Facility (TALF) to include other financial assets on top of the ones already promised.
Bottom-line, these actions by the Fed today certainly increase the chances of a housing bottom sometime this year, and a return to economic growth by year end. Ten-year Treasury yields plunged by a half a percentage point shortly after the statement, which will drive significantly lower mortgage and corporate bond rates across the country. I sense a refinancing or financing opportunity coming on.
Scott Glass Wells Fargo Home Mortgage (949) 282-4007 Tel Scott.Glass@wellsfargo.com

Orange County Housing Report: A Stimulating Pause

2009-03-10T13:22:00.000-07:00

As all of the details of the various stimulus plans are slowly making their way to Main Street, the Orange County housing market has slowed as well. The tax credit for first time home buyers (individuals who have not owned within the prior 3 years), the increased conventional loan limit to $729,750, the unveiling of the details to help instigate lenders to refinance loans for homeowners who are as much as 5% upside down in their homes, and the unveiling of the finer points to help promote loan modifications, are only just beginning to make their way to the experts and professionals that work within the real estate and lending industries. It is no wonder that there has been a pause in recent Orange County demand as buyers are just not yet aware of how all of the recent fanfare applies to them. Also, there has benn recent news of even more stimulus to come to help resurrect the dormant financial engine that keeps our economy in gear. The frozen financial markets are only moving because the U.S. Treasury is purchasing pools of loans to keep lending flowing. The government is working on incentives to motivate investors to enter the game as well. They are looking to help purchase “toxic assets,” a term that simply means “bad loans,” to help instigate lenders to lend again. The problem thus far has been that lenders have received billions of dollars from the government only to clamp down further on lending. Part of the problem is that for every loan that is bad, they have to have a certain threshold of capital set aside. With so many bad loans on the books, lenders have had to maintain hordes of capital in the form of reserves and they cannot use that money for new loans. So, this is what the government is sifting through in the background to repair out financial markets and restore confidence in the U.S. financial system once again. As more and more of these programs are unveiled there will be a slight delay until it trickles down to the Orange County marketplace. Similarly, the new higher conventional loan limits that were unveiled in February of 2007 took over a month until it finally hit Main Street in the form of new loans. The latest round of stimulus was only unveiled in the third week of February of this year, but the real estate and financial industries are still ironing out all of the details. With all of the stimulus and record low interest rates, each program is going to slowly trickle down in the form of increased demand in real estate in weeks and months to come.

So how do the numbers look? In the past two weeks, demand, the number of new pending sales within the prior month, decreased by 195 homes to 2,624. Last year at this time there were 731 fewer pending sales, totaling 1,893. Two years ago there were 2,388 pending sales, 236 fewer than today. The affects on demand from the stimulus plan should probably start to play out within the Orange County real estate marketplace over the next month. The active listing inventory has remained relatively unchanged so far this year, increasing by only 43 homes over the past month, bringing the current total to 11,562. Last year the active inventory was at 15,412 homes, 33% higher. Two years ago there were 996 additional homes on the market, totaling 12,558, 10% higher. The current expected market time increased from 4.09 months two weeks ago to 4.41 months today. Last year the expected market time was 8.14 months. Two year ago the expected market time was 5.26 months. Total Orange County pending sales is at a much healthier level compared to the last two years. Currently, total pending sales is at 4,408, an increase of 67 pending sales in the past two weeks. This is the highest level for total pending sales since I began tracking this figure back in September of 2006. Last year at this time, total pending sales totaled 2,524, 1,884 fewer than today. Two years ago it was at 3,419, 989 fewer compared to today. Today marks the first time that the distressed inventory is lower compared to the prior year, after falling by another 99 foreclosures and short sales over the prior two weeks to 4,408. One year ago today, the distressed inventory was at 5,057, 649 more than today. Since peaking on August 7th at 5,950, the distressed active inventory has dropped by 20%; that is 1,166 fewer distressed homes on the active market. The distressed inventory represents 41% of the total active inventory, dropping from 42% two weeks ago. The number of pending sales that are either a short sale or a foreclosure remained at 62%. The expected market time for foreclosures increased slightly from its record low of .99 months two weeks ago to 1.08 months today. Foreclosures remain the hottest category of homes within the Orange County marketplace today. The expected market time for short sales dropped ever so slightly from 5.16 months to 5.14 months today, a record low for the current housing downturn.

The condition of the Orange County real estate market really depends upon the price range. Of course, the lower the price range, the hotter the market. The hottest range is detached homes below $250,000 with an expected market time of only 1.95 months. However, there are only 321 detached homes within the detached active home inventory out of 6,966 total, less than 5%. The second hottest range is detached homes between $250,000 and $500,000 with an expected market time of 2.46 months. There are 1,905 detached homes within that range, 27% of the detached inventory. Here’s a breakdown of the year over year change in both supply and demand for Orange County’s various price ranges for both detached homes and condominiums:

It will be interesting to witness the ramifications of increased demand in the lower ranges. The lower ranges are already hot and there have been reports from the trenches that a bottom in pricing has been achieved in many areas where prices have not changed over the course of the past few months. As a stronger bottom is established in the lower ranges throughout Orange County, and the flow of financial system is restored, the strength in the market will eventually start to trickle up to the higher ranges.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Back on the Market

2009-03-02T15:34:00.000-08:00

32961 Danapine, Dana Point

4 Bedroom, 3.5 Baths, 2 Car Garage

$784,900

Customized Nantucket in Danawoods! Spacious master suite or bonus room on lower level and second master on upper level. Enjoy the views through the trees and down the canyon. Kitchen remodel offers granite countertops, newer appliances, newer sink and fixtures and refinished cabinets. Relax in your spacious backyard with private pol and spa and mature landscape. Large fenced in dog run on the side of house. Outside fenced and gated storage area to the side of garage. Garage features a roll up door and walk-in 7'X6' storage room. Other upgrades include new carpet, tile flooring, interior and exterior paint, newer heating and A/C units, 50 gal. water heater, Plantation shutters, Brinks alarm system, mirrored wardrobe doors,ceiling fans, crown molding and high baseboards. Located in on of Dana Points most desirable neighborhoods, this is the perfect home for all buyers. Just minutes to the beach, Dana Point Harbor and Ocean Ranch shopping.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Orange County Housing Report: A Stimulating Market

2009-02-24T08:24:00.001-08:00

Demand is surging and last week’s newly revealed stimulus plans haven’t even hit the Orange County real estate scene yet. Prior to diving into the numbers, let’s decipher the impact of both stimulus plans on Orange County housing. This is just an initial overview, as more details will be revealed as these programs are officially launched. First, here is how the Economic Stimulus Plan for 2009 will affect housing:

· Tax Credit - $8,000 tax credit for anybody that purchases a home and has not owned a home in the prior three years. This credit is good for all purchases of primary residences from January 1st through the end of November, 2009. For example, if a couple has a tax obligation of $3,000, with the credit applied, they would instead receive a refund of $5,000. The tax credit begins to phase out for couples with incomes above $150,000 and individuals with income above $75,000. They also must live within the home for three years.
· Conventional Loan Limit - the conventional loan limit for high cost areas will increase for high cost areas to last year’s $729,750 level. The limit had dropped to $625,500 on December 31, 2008. As a result, this will return buyer activity to homes between $700,000 and $800,000.

Here is how the Homeowner Affordability and Stability Plan will affect Orange County housing:

· Refinancing Loans – for homeowners with less than 20% equity, they can now refinance their loans. This is for all loans at or below the conventional loan limit. Remember, this now goes all the way up to $729,750 in Orange County, considered a high cost area. This program is not available for homeowners that owe 5% more than their homes are worth.
· Stability Initiative – this program is designed for homeowners who are struggling to afford their monthly mortgage obligations due to high mortgage payment to income ratios and cannot sell because prices have fallen too far. The program will reduce a homeowner’s monthly obligation to levels (debt ratios) that are more sustainable. Homeowners that are still current on their mortgage can apply as well. This program is also aimed at loans at or below the conventional loan limit. The lender will be required to modify the loan down to a 38% mortgage debt to income ratio. Lenders will accomplish this by reducing the interest rate or the outstanding amount owed. The federal government will match the lender’s reduction dollar-for-dollar down to a 31% debt to income ratio. After 5 years the rate could increase. There is a monthly incentive to stay in the home after it is modified, up to $1000 per year for 5 years.
· Low Mortgage Rates – the Treasury Department is doubling its pledge to invest money in Freddie Mac and Fannie Mae in an all out effort to keep interest rates at their current historically low levels and to maintain the proper flow of loans.

In Orange County, we are already experiencing tremendous demand in the lower ranges. These stimulus plans will ultimately help our local real estate market further. How far reaching will play itself out over the coming months, but we are already seeing quite a bit of activity earlier this year compared to 2008. A bottom in pricing in the lower ranges may be right around the corner, which ultimately would increase confidence. Establishing a bottom in the lower ranges is essential in stopping the fall in ALL ranges. In no means will the flow of short sales and foreclosures stop; however, the levels will start to drop. With lower levels of distressed homes and higher demand, the market will improve.

So how do the numbers look? In the past two weeks, demand, the number of new pending sales within the prior month, increased by 148 homes to 2,891. Last year at this time there were 999 fewer pending sales, totaling 1,820. Two years ago there were 2,463 pending sales, 208 fewer than today. It will be interesting to see the affects of the stimulus plan on Orange County housing demand over the next 60-days. The active listing inventory has remained flat so far this year, decreasing by 19 homes over the past month, bringing the current total to 11,541. Last year the active inventory was 33% higher at 15,392 homes. Two years ago there were 653 additional homes on the market, totaling 12,194. The current expected market time dropped from 4.31 months two weeks ago to 4.09 months today. This is the lowest expected market time since April, 2006. Last year the expected market time was 8.46 months and dropping. It was dropping because demand was finally being restored after a major price depreciation due to a 6-month hiatus in buyer activity. Two year ago the expected market time was 4.59 months. Total Orange County pending sales is at a much healthier level compared to the last two years. Currently, total pending sales is at 4,341, an increase of 322 pending sales in the past two weeks. In 2008, Orange County did not reach the current level until June, the tail end of the Spring market. The difference this year, the Spring market has really just begun. Last year at this time, total pending sales totaled 2,333, 2,008 fewer than today. Two years ago it was at 3,391, 950 fewer compared to today.

There are 190 fewer distressed homes on the market, both foreclosures and short sales. Since the end of November, the total number of active distressed properties has dropped by 918 homes, a drop of 16%. The distressed inventory represents 42% of the total active inventory, dropping from 44% two weeks ago. 62% of all pending sales are either a short sale or a foreclosure, dropping from 61% two weeks ago. The expected market time for foreclosures dropped to its lowest level of the downturn, .99 months. That’s correct; it stands at a little less than a month. Short sales dropped to its lowest level as well with an expected market time of 5.16 months.

What about the upper end? When the expected market time for a range falls above the 12 month mark, competition is so fierce and demand is so low that it is basically a deep buyer’s market. A change of several pending sales can adjust the expected market time dramatically, since the number is so small to begin with. Over the past couple of weeks that was demonstrated in spades. The expected market time changed considerably as demand increased. However, it is still a deep buyer’s market. For example, the expected market time for the $4 million plus market dropped from 60.0 months to 33.36 months. What happened? Demand increased from 5 to 11 pending sales and the active inventory increased from 352 to 367 homes. So, demand is up, but it is still at a level where it is nothing to write home about. Demand for every range above $750,000, with the exception of the $1.5 million to $2 million range, increased. It would be great if this trend continued, but most of these homes are financed with jumbo loans, loans above $729,750. It is still extremely challenging to procure a jumbo loan and the rates are almost 2% higher than conventional rates. These loans are scrutinized so carefully because lenders cannot sell them off to investors, so they need to keep these loans on their balance sheets instead. The government is not going to touch this sector. Instead, the upper ranges will be restored when confidence in the financial system restores to Wall Street and the international investment community.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Just Reduced in San Clemente

2009-02-17T16:17:00.000-08:00

1408 Avenida Tranquilla, San Clemente
$819,000
Nestled in the hills of Rancho San Clemente, this pristine home features numerous upgrades. Offering 5 bedrooms, 3 baths and a 3 car garage. Main floor 5th bedroom is currently used as an office. The gourmet kitchen features granite counters and opens to a spacious family room. Complete with cozy fireplace and a plasma t.v. Beautiful wood floors throughout most of the lower level. All baths feature granite counters and framed mirrors. Crown moldings, high base boards and designer paint accent the living areas. Relax and unwind in your backyard with covered outdoor living area, firepit and bar with built-in barbeque, sink and refrigerator. Central vacuum makes for easy clean up. Exterior recently painted. Situated in the sought after community of Brisa Del Mar with association pool and spa.
For a showing of this fine home call Dianna and Brian McGarvin at 949-370-2652.

County Resale Inventory Stats

2009-01-12T17:21:00.000-08:00

Orange County
· Total Active Inventory = 11,287
· Demand (30-days of pending sales) = 2,008
· Expected Market Time = 5.62 months
· Distressed Listings = 5,118 (representing 45.3% of the active inventory)
· Distressed Demand = 1,385 (representing 69% of demand)

Los Angeles County
· Total Active Inventory = 30,956
· Demand (30-days of pending sales) = 4,516
· Expected Market Time = 6.85 months
· Distressed Listings = 12,976 (representing 41.9% of the active inventory)
· Distressed Demand = 2,728 (representing 60.4% of demand)

Riverside County
· Total Active Inventory = 15,137
· Demand (30-days of pending sales) = 2,892
· Expected Market Time = 5.23 months
· Distressed Listings = 10,213 (representing 67.5% of the active inventory)
· Distressed Demand = 2,275 (representing 78.7% of demand)

San Bernardino County
· Total Active Inventory = 11,635
· Demand (30-days of pending sales) = 1,742
· Expected Market Time = 6.68 months
· Distressed Listings = 6,931 (representing 59.6% of the active inventory)

San Diego County
· Total Active Inventory = 15,153
· Demand (30-days of pending sales) = 2,595
· Expected Market Time = 5.84 months
· Distressed Listings = 7,001 (representing 46.2% of the active inventory)
· Distressed Demand = Insufficient Ability to Properly Search

Just Listed in Laguna Beach

2009-01-06T10:34:00.000-08:00

971 Santa Ana Street
Laguna Beach, CA 92651

$949,000

Great Laguna Beach home offers panoramic ocean and Catalina Island views. This three bedroom and two bath home offers two decks to relax and enjoy the spectacular views. Kitchen with breakfast counter opens to dining and living areas. Living room offers cozy fireplace. Wood beamed ceilings throughout the upper level.

For more information on this fine home call Dianna and Brian McGarvin at 949-370-2652. http://www.pierbowl.com/

Just Listed...

2008-12-31T10:08:00.000-08:00

Turnkey single level offers sit down ocean and Catalina views. This home has three bedrooms and two baths. Bright kitchen with breakfast counter and built-in china cabinet. Living room offers cozy fireplace and vaulted ceilings. Newer interior/exterior paint, heater and vinyl fencing.

$749,900

9 Cartagena, San Clemente

http://www.pierbowl.com

Orange County Housing Report: Lower Ranges Hot, Upper Ranges Not

2008-12-15T10:39:00.000-08:00

The government has been hard at work attempting to jump start demand. The good news is that it is really working for all homes priced below $750,000, but little has been done to help homes found above $750,000. Homes above $750,000 represent 30% of the active inventory but only 12% of demand. What’s the problem? Unfortunately, Orange County has a lot of high cost homes that just are not falling under the scope of the immediate government fixes. Thus far, the Unites States Treasury, the Federal Reserve and Congress have stepped in and poured billions of dollars into the conventional lending system. In March of this year, conventional and FHA loan limits were changed in high cost areas, like Orange County, rising from $417,000 to $729,750. They took over Fannie Mae and Freddie Mac, the two private agencies responsible for purchasing conventional loans from all of the lenders that originate these loans. And, just a few weeks ago, since Wall Street and investors were no longer buying “pools” of loans from Fannie Mae and Freddie Mac, the government announced that they would step in and invest in these pools to the tune of $500 billion. So, the government has utilized just about everything it has in its bag of tricks to keep the financial system flowing for conventional and FHA lending products. These fixes unfortunately do not touch the jumbo lending arena, loans found above $729,750. Besides extremely tough lender requirements and at least 20% down, buyers seeking a jumbo loan are facing interest rates that are about 3% higher than conventional interest rates. Conventional rates are now hovering around 5% versus jumbo rates at 8%. That’s a significant difference. Prior to the current financial crisis, the difference between conventional and jumbo rates was about a quarter of 1%. Thus, demand in the upper ranges has been dramatically affected. Since the government is not backing up institutions that make loans outside of the conventional loan limits, jumbo loans, student loans, construction loans, investor loans, etc., lending institutions are making it much tougher to qualify and are charging a lot more for them. Without the government stepping into this area of lending, the products are “riskier” and lenders must charge extra for this risk. The current “frozen financial market” could have been avoided, and the severity of the current recession as well, if the government would have stepped in sooner. The programs pulled from their bag of tricks should have each been implemented about 6-months earlier. The “subprime meltdown” in March of 2007 turned into the “financial crunch” in August of 2007 as lending virtually came to a grinding halt. In September of 2007 Bernanke, the Federal Reserve Chairman, suggested that the conventional lending and FHA lending limits should be changed immediately and not wait 6-months for the crisis to grow worse. He knew that the government needed to be aggressive and proactive and not reactionary like it tends to be with just about every other crisis. Unfortunately, the government waited 6-months. Other government programs have followed a similar fate; thus, the “financial crunch” turned into the “frozen financial market” a few months ago. Investors were no longer willing to purchase the safest investment financial investments, loans backed by Freddie Mac and Fannie Mae. The government stepped in to purchase these pools of loans, something that should have been done much earlier in the year. Fortunately, 70% of the Orange County housing market has been aided by the government’s efforts. And, there is more aid to come. The government is not going to let up until they turn around housing. Look for programs aimed at abating foreclosures, lowering interest rates further (for conventional and FHA loans) and tax incentives for buyers.

So, how do the numbers look? Let’s count our blessing first and take a close look at total pending homes in Orange County compared to last year. Currently, total pending sales is at 3,890 versus 1,659 one year ago today. That’s a difference of 2,231 pending sales, or 134% greater. The difference is nothing short of staggering. With the beginning of the financial crunch last year, demand and the total pending count suffered immensely and so did prices. Values of homes plummeted as supplies were high and demand was low. Values are still dropping in most areas today, but not at the clip that they were last year. Demand, the number of new pending deals within the prior month, dropped by 235 homes in the past month to 2,322. A drop in demand is part of the normal Orange County housing cycle through the end of the year. Last year at this time, demand was at 1,148, 51% less than today. Two years ago it was at 1,839, 21% less than today. Three years ago, demand was at 2,175, 6% less than today. The last two reports mark the first time that demand exceeded levels reached three years ago, that’s 2005. Since demand is higher today compared to the prior three years, it is expected that we are in for healthier demand in 2009. All of the ingredients are there: lower interest rates, lower inventories, better values, more affordable housing, and more government programs geared towards stabilizing housing to come. In the last month, the active listing inventory has fallen by 870 homes to 12,388, its lowest point of the year. Cyclically, the inventory drops from September through the end of the year, but this is the first time since 2004 (prior to the current downturn) that a low in inventory was reached in the month of December. From 2005

through 2007, the inventory did drop, but each year ended with more inventory than it started with. Until this year, the inventory was methodically growing and reaching new highs. Last year the inventory was at 16,128 homes, 3,740 additional homes compared to today, 30% higher. Two years ago the inventory was at 12,661, 273 additional homes compared to today. Today’s expected market time is now at 5.34 months compared to 5.18 months four weeks ago. There has been a drop in demand, but equally, there has been a significant drop in the active inventory; thus, the expected market time has virtually remained the same. Last year the expected market time was at 14.05 month and 6.88 months two year ago. The distressed inventory, foreclosures and short sales, has dropped by 276 homes in the past two weeks to 5,519 homes, its largest drop of the year. Distressed homes currently make up 44.6% of the total active inventory and 66% of current demand. 78% of all distressed homes are found below $500,000 and 92% are found below $750,000.

So, if you are a seller, how should you approach the market? Regardless of the time of year, in a depreciating market, the time to sell is NOW. A homeowner that has to sell should not wait for the Spring market, cyclically the best time of year to sell with the highest demand. Currently prices are dropping about 1% per month. To wait a few months is risking losing additional equity. With increased demand, many markets and lower ranges may reach a bottom in pricing in mid-2009, but we expect to reach only equilibrium with no real change in price. There will still be additional foreclosures and short sales to compete with throughout 2009. These additional distressed homes will keep a lid on any potential appreciation. As a homeowner, if you have the ability to stay in your home for years to come, you will do fine. As we approach a market bottom, this in NOT the time to sell and rent. As stated earlier, in many areas and price ranges, most depreciation has already taken place. It would be better to stay within your home as your value will eventually rise again and restore much of the lost equity. The bottom line, it just takes time. Now, if you must sell, keep in mind that there is a lot of competition and a lot of the competition MUST sell due to mortgage unaffordability, job loss, foreclosure, divorce, relocation, etc. Sellers that MUST sell are motivated. As a seller, carefully arrive at price, be certain that your home is in great condition and choose the absolute best, experienced, professional agent that will help you navigate in this challenging market. As a seller, these are the only factors that you have control over. Approach this market with care. Don’t waste your time by overpricing your home and chasing the market down in price. Make sure that your home is in top showing condition to leave the most favorable impression for all potential buyers that walk through your door. And, turn to the expert with a proven track record in representing your real estate needs in this market. This is not the market to just leave the sale of your home to chance by working with the family member or friend or the “area expert.”

If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Orange County Housing Report: The Government Will Fuel Demand

2008-12-04T11:18:00.000-08:00

Now that the financial markets are frozen, the Federal Reserve has stepped in and will buy mortgage-backed securities to the tune of $500 billion. Almost immediately, rates dropped by about a half of a percent. As a result, more and more buyers will take advantage of rates and GOBBLE up homes right here in Orange County. Since the economy has put on the brakes as a direct result of the financial crunch and housing market, the government is poised to step in and do just about whatever it takes to get the economy back on track. The fundamental key to fixing the economy is to fix the lending crisis. We have moved from a subprime meltdown, March 2007, to a financial crunch, August 2007, to a completely frozen financial system, October 2008. The problem is that there are very few investors willing to purchase “pools of loans” on the secondary market. The financial system depends upon this. Even though current “pools” have real quality loans where borrowers actually have to qualify for the loan, nobody is stepping up to invest. The problem is that these investment pools had been rated by a few different companies and their rating systems were inaccurate and flawed. So, investors do not know who to trust at this point, and nobody has properly invested in the secondary markets. This is one crisis that is just not willing to work itself out without government support. With the government stepping in to purchase the mortgage-backed securities, suddenly rates dropped to the lowest level of the year. This is perfect timing if you are a buyer about to purchase. This is the first of many steps that the Federal Reserve, the U.S. Treasury and Congress will take to get our economy back on track. President-elect Obama has surrounded himself with a lot of talent in the past couple of weeks to address the current economy. America voted for change, and that is exactly what America is going to get. We can expect there to be sweeping changes reminiscent of Franklin D. Roosevelt. There will be programs to abate foreclosures and unemployment. There will be programs to encourage buyers to purchase in today’s housing market. So, change is in the air and Orange County housing will be a direct beneficiary. This may take a several months to totally trickle down to housing, but some of the programs, like what the Federal Reserve did earlier this week, will have an immediate noticeable impact. Let’s put a half point rate drop in proper perspective. Dropping from 6% to 5.5%, a buyer would save $158.55 per month, or $1,902.60 per year, with a $500,000 loan. Put in another way, the payment for a $500,000 loan at 6% is the same as the payment for a $528,000 loan at 5.5%. So, a buyer that had been looking at a loan of $500,000 could either pocket the savings or look at spending about $28,000 more with no effective change in their mortgage payment.

So, how do the numbers look? It is too soon to see the impact of the change in rates on demand. This change comes in the midst of the Holiday market, the slowest season for Orange County housing. The impact may not be felt until the end of January, the beginning of the Spring market. Current demand, the number of new pending sales within the prior month, dropped by 111 homes in the past two weeks to 2,446. Last year at this time, though, there were only 1,243 pending sales, 49% fewer. Two years ago there were 531 fewer pending sales, a 22% difference. The total active inventory is now at 12,947 homes after dropping by 311 homes in the prior two weeks. Last year there were 3,822 additional homes on the market and 625 additional homes two years ago. The expected market time is currently at 5.29 months, a small increase from 5.18 months two weeks ago. Last year the expected market time was at 13.49 months and 7.09 months two years ago. There are now 5,795 distressed homes on the market, foreclosures and short sales, a drop of 6 homes in two weeks. Last year there were 3,525 distressed homes on the market, 2,270 fewer. The difference is that the today’s distressed inventory has been at a plateau since June. Last year at this time the distressed inventory was rapidly increasing. In November 2007 alone, the distressed inventory increased by more than 500 homes. 78% of all distressed homes are below $500,000, compared to 63% a year ago. 93% of all distressed properties are found below $750,000, the same as 2007. The distressed inventory represents 45% of the total active inventory and 66% of demand versus 21% and 26% respectively one year ago. Back in June of this year the distressed inventory represented 40% of the active inventory and 49% of demand. There were actually 103 additional distressed homes on the market and 123 additional distressed homes embedded within demand. The big difference currently is that we are in the throes of the Holiday market and there are fewer discretionary home sellers, sellers with equity in their homes, on the market. Discretionary sellers don’t have to sell. They have a choice and would rather enjoy the holidays.

So, if you are a buyer, how should you approach this market? My educated bet is that the government’s comprehensive attention to the economy, financing, foreclosures and housing will have a significant impact on the Orange County housing market. Factoring in Obama’s New Deal after he takes his oath of office in January and factoring in the delay in implementation, I am actually going to call a bottom in the market at around June 2009. It could come even sooner, time will tell. I am certain the doomsayers, a.k.a. the “bloggers,” will eat me alive, but the fundamental ingredients are all there: robust activity in homes below $500,000, lower interest rates, home affordability at levels not seen in years, more government programs to come. The below $500,000 range is significant as it represents 70% of the active inventory. Also, it is important to note that the lower ranges always lead in a housing market recovery. Home prices have already completed a majority of their movement. From August 2007 through February 2008, prices dropped between 3 to 5% per month. Now, they are on pace to drop between ½% to 1%, but will stop and plateau in about six months. So, if you are a buyer willing and able to stay in your home for the next several years, be assured that your investment in your home will more than pay off. Many discount the notion that we will ever return to rapid appreciation, but in markets like today, prices often drop below the “true” bottom as “would be” buyers hesitate and sit the market out until they are assured that the “water is perfect.” Yes, I am saying that current pricing is below where pricing really should be. This will be proven out in a couple of years from now after everybody is properly informed that the market bottomed out a while ago. Economists and experts alike can never tell you precisely when a bottom is occurring; instead, after there is months of data, they will establish that a bottom occurred somewhere in the past. For the first year after a bottom is called, buyers will be skeptical and sit the market out, waiting for the “herd.” After many buyers enter the market, the new “herd mentality” of our economy will ignite a wave of buying that will drive demand through the roof and we will realize rapid appreciation once again. The naysayers can chime in again and point to charts, experts and economists that state the opposite, but nobody is picking up on the newest element of our current economy, the “herd mentality.” If you need proof, take a look at Wall Street over the past month and a half. The swings up and down are unprecedented. There is no rush right now, but if I were a buyer, I would isolate the perfect home for my family right now. Do not be afraid to the pull the trigger. Even if prices drop a few percentage points more, know that in the long run you will do fine. Orange County housing is an excellent long term investment and much better than stocks and bonds. Be very aware that in arriving at price, the average sales to list price ratio for all of Orange County is 97% and for foreclosures it is 101%. If you are contemplating writing an offer at 90% of the asking price, be assured that the data is not in your favor and that the chance that your are wasting everybody’s time and paper is rather significant.

So, if you are a seller, how should you approach the market? Unfortunately I have already heard of sellers willing to wait for the government to step in to fix the housing market. As a seller, if you have to sell within the next 18 to 24 months, you are not sitting in as good of a position as buyers. Sellers that have the ability to sit on the sidelines longer will be fine. So, even though we are in the midst of a Holiday market, if you have to sell, price your home according to the market value, or slightly below, and have your home ready to show each and every day, from day 1 to day 101. As a seller you never know when the buyer of your home is going to walk through your door, so be ready. In arriving at price, be acutely aware of your location and condition. Are there power lines nearby? Can you hear street traffic from your home? Is your home in perfect move-in condition? Remember, with so many homes on the market, competition is fierce and if two homes are identical, but one has a better location, that is the home that will always sell first. As a seller, carefully choose the agent that is going to represent you in the sale of your home. It’s not about price; it’s about experience and knowledge to help navigate through the challenging housing market. It is not brand that will sell your home. It is not the “area expert” that will sell your home. It is not the licensed friend or family member that will sell your home. To be successful in this market, you need an actual expert in real estate. Somebody that knows the local market inside and out with data, a proven track record and experience. This is the market where the agent interview is the most important element in selling your home. So, interview carefully and do not jump to a quick decision. I personally know of an individual who went with the “subdivision” expert over the “market “expert to save in commission dollars. He sold the home with the subdivision expert after 14 months on the market and $250,000 in price reductions. Had he paid a few thousand dollars more and hired the market expert, he would have netted an additional $140,000. The moral to the story: if you are a buyer or seller, hire an expert to best represent your family.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Orange County Housing Report: Buying Season is Upon Us

2008-11-17T12:08:00.000-08:00

IMPORTANT NOTE: The Southern California Multiple Listing Service just incorporated all of the data from four other area regional MLS systems. In the short term there will be some duplication in the MLS data. Surprisingly, there were 600 listings in Orange County that were added to the system, representing 5% of the active inventory. So, initially, the data that I provide will be slightly skewed.If you are a buyer, the bottom of the erosion in pricing in Orange County, especially in the lower ranges, is drawing near and will most likely occur by mid-2009. If you are a buyer, when you isolate the perfect property that matches your family’s requirements, purchase the home knowing that you made the decision that is in the best interest of your family. The Orange County housing market hit a bottom in demand during the fourth quarter of 2007 through the first quarter of 2008. That bottom in demand resulted in a rapid decline in pricing, especially for homes priced below $500,000. There is still price erosion in the lower ranges, especially in areas that are hit harder with distressed proeprties; HOWEVER, it is NOT at the rate that was realized during the bottom of demand. With policies designed to restore the housing market and a new administration in the White House looking to not only thaw financial markets but to help the homeowners in distress, our government is going to do whatever it takes to turn the economy around. We will start 2009 with much higher demand compared to the beginning of this year. Many discretionary homeowners not in distress will continue to opt to not place their homes on the market, allowing for the inventrory to drop. As supply shrinks and demand rises, as it will do again in the Spring market, from the end of January through May, prices wil stabilize. It is simple supply and demand, Econ 101. This will hold especially true for the lower ranges, from $650,000 and below, where financing is readily available through FHA and conventional loan programs. The conventional loan limit is going to drop (unless the government makes a change prior to December 31st) from $729,750 to $625,500, so we can expect most demand to be confined below the $650,000 mark. Until the financial markets thaw, non-conventional loans, borrowers with special needs or jumbo loans above the $625,500 level, will continue to be much more difficult to obtain and will continue to hold back demand. So, buyers looking below $650,000 can take the plunge knowing that pricing will stabilize. If you are a buyer and need short term housing, less than a few years, do NOT buy. But, if you are a buyer who plans on raising a family and staying in a home beyond just a couple of years, buy knowing that the real estate market will return and it will return with a vengeance. Many experts have stated that the days of double digit appreciation are in the past. I could not disagree more. Our current economy is moved by what I term the “herd mentality” and the age of “too much information.” With newspapers, television, MSNBC, CNBC, CNN, FOXNews, the proliferation of Internet sites, blogs dedicated to the continued bust of housing and the economy, housing reports on the front page of Yahoo, text alerts, email alerts, RSS feeds, etcetera, there is just too much information available to make a decision. Thus, in the past couple of years we have witnessed giant swings in the stock market, oil prices and housing. For the most part, the majority of consumers are trending to jump in unison. There will be more residential housing units that sell next year compared to this year, so the probability that we hit bottom in pricing next year is great. In 2010, we will most likely appreciate a bit, while many consumers wait to hear the news that the bottom was already reached. Remember, nobody is ringing a bell to indicate when we hit bottom; instead, economists and analysts will be able to inform the public at large that a bottom was reached many months later, after it occurs. In 2011, with all of the pent up demand and the realization that Orange County is undervalued, a wave of demand will be unleashed on the market and we will return to rapid appreciation. If I were a buyer, I would prefer being on the side of the equation where I had complete control over my destiny and within a buyer’s market, today’s market.

So, how do the numbers look? The current active inentory grew by 468 homes and now totals 13,258. This is historically when the inventory drops, but the change in the MLS skews the numbers. Demand, the number of new pending deals within the previous month, increased by 94 homes to 2,557. The expected market time in Orange County was almost unchanged, dropping from 5.19 months to 5.18 months. Last year at this time there were 3,975 additional homes on the market, a 23% difference, and demand was off by 1,262 homes, a 97% difference. The expected market time was 13.31 months. In 2006 there were 907 additional homes on the market, a 6% difference, and demand was off by 570 pending homes, a 29% difference. The expected market time was at 7.13 months. The distressed inventory, the total number of foreclosures and short sales on the market, grew by 302 homes. Most of this too was due to the change in the MLS. It is more interesting to compare year over year distressed numbers. With the exception of Talega (down 24%) and Portola Hills (down 24%), every area in Orange County realized a year over year increase in the number of distressed properties on the market. Here’s the top 10 biggest movers and shakers:

Current Last Year Year Over Year Change % of Current Active Inventory
Newport Coast 19 0 Infinite 9.3%
Laguna Woods 17 2 750% 4.0%
Newport Beach 56 9 522% 9.8%
Laguna Beach 25 7 257% 7.4%
La Habra 150 52 188% 61.2%
Dana Point 56 22 155% 20.3%
Fullerton 253 101 150% 50.2%
Corona Del Mar 7 3 133% 3.9%
San Clemente 128 57 125% 27.1%
Coto De Caza 38 17 124% 26.6%

These numbers help illustrate that the higher end markets are no longer immune to foreclosures and short sales, even though they remain a small percentage of the current active inventory within those areas. For buyers looking for a “deal” in purhasing a foreclosure, in October, the sales price to list price ratio was 101%. This means, on average, foreclosures sell for over the asking price. In October, the sales price to list price ratio for short sales was 97%. This means that there was a little bit of flexibilty in selling short sales. In the trenches I am hearing that almost every agent has a handful of buyers waiting for the next great “deal” to come along and many have to write offers well below the asking price, wasting everybody’s time in the process. Also, it is important to note that 84% of all distressed properties can be found at or below $500,000, and 95% are found below $750,000. So, buyers looking for a distressed deal above $750,000 can expect a bit more competition because there are simply fewer within those ranges.

We already discussed how to approach the market as a buyer, what about sellers? We are within the Holiday market where consumers divert their attention to holiday parties, a big Thanksgiving feast, gift giving and receiving, and toasting to a New Year. After the New Year’s resolutions wear thin, towards the end of January, the market begins to transition to the Spring Market, where more homes come on the market and demand starts to rise. Until then, sellers need to know that this is historically the slowest time of the year. Ironically, it will turn out that this Holiday market will actually be better than the first several months of this year and has already surpassed the last couple of years in terms of year over year comparisons. Nonetheless, sellers need to know that the market is slowing and that there is tremendous competition from sellers who cannot pull their homes off the market until their homes are sold, foreclosures, short sales and relocations. If you are a seller and can hold onto your home for the next few years, then stay put and wait for prices to rebound. Down the road, they will. If you are a move up seller, than this is a great time to make your move. When homes do appreciate again, the nominal impact on the higher ranges is much greater. For example, if homes appreciate 5%, 5% of $500,000 is $25,000, versus 5% of 750,000 which is $37,500, a $12,500 difference. Carefully pricing a home is fundamental to achieving success in selling in today’s market. Sellers need to be acutely aware of their location and condition in arriving at their asking price. Sellers should also prepare their homes to sell and be certain that their homes are in showing condition each and every day, regardless of the amount of time it takes to sell their home.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Orange County Housing Report: Demand Slows with Holiday Market

2008-11-03T12:05:00.000-08:00

October 30, 2008
The Holiday Market, from Halloween through the first couple of weeks of the New Year, starts now as demand begins to slow; HOWEVER, current demand is almost double last year at this time. With the election upon us, the stock market bouncing all over the place along with interest rates, and all loans outside of FHA and conventional frozen from the effects of the financial crunch, it is no wonder that demand has dropped recently. Current demand, the number of pending homes within the past month, dropped by 210 homes in the past two weeks to 2,463. Still much improved compared to the 1,241 pending sale mark in 2007 or 2,011 in 2006. The additional demand is only in the lower ranges,though, where the majority of all distressed sales exist. Distressed sales are the fuel that is igniting the first time home buyers market and inviting investors (only those with a lot of cash) back to the housing market. Last year at this time there were 6,095 active listings below $500,000 and demand at 477 pending sales. Today, there are 6,450 active listings below $500,000 and demand at 1,736, that’s a 263% improvement year over year. 67% of the current active inventory below $500,000 is either a foreclosure or short sale and 85% of ALL distressed sales are found within this range as well. In exploring prior downturns, it is always the lower ranges that heat up first and fuel an eventual recovery. One can only imagine how much better demand would be if interest rates weren’t bouncing around and loans outside of conventional and FHA did not require unrealistic FICO scores and much higher interest rates. In the jumbo loan arena, loans above $729,750, demand is very low, even lower than one year ago in the midst of the beginning of the financial crunch. For example, for the range of homes between $750,000 to $1 million, demand is at 140 homes today, 23% lower than the 181 mark last year and 58% lower than the 332 mark two years ago. Every range above $1 million is either similar or even worse. This has everything to do with the frozen financial markets; all products that do not have some sort of government backing are mired in conditions and restrictions where only the cream of the crop with a lot of cash on hand need apply. Since fewer distressed sales are within the higher ranges, discretionary sellers with equity are simply avoiding competing in the housing market under the current conditions. There are only 1,364 active listings between $750,000 and $1 million, 41% fewer than the 2,306 level last year and 49% fewer than the the 2,663 level in 2006. The market has changed and discretionary sellers with equity are wisely avoiding the market if at all possible. We can expect more of the same until all of the government legislation and manipulation past, present and future start to thaw the frozen financial system. Signs of thawing are lower rates for ALL financial products, the resumption of lending for jumbo loans, commercial loans and all forms of credit, and the return of demand in homes priced above $750,000.

So, how do the numbers look? The current active inventory increased by 68 homes in the past two weeks to 12,790. Last year there were 4,664 additional homes on the market, totaling 17,454. Two years ago there were 2,473 additional homes on the market, totaling 15,253. With a decrease in demand and a slight increase in the active inventory, the expected market time increased from 4.76 months to 5.19 months. 5.19 months is still much better than an expected market time of 14.06 months last year and 7.59 months in 2006. The TOTAL pending count is currently at 3,960 pending sales. The TOTAL pending count is 137% higher compared to the 1,671 level last year. Distressed homes, foreclosures and short sales, increased slightly from 42.9% of the inventory two weeks ago to 43.0%. The total number increased by 46 homes, bringing the total to 5,499. 46% of all distressed home activity is confined within just eight areas (ranked from highest concentration to lowest):

· 939 in Santa Ana (79.2% of the 1,186 listings)
· 658 in Anaheim (76.9% of the 856 listings)
· 321 in Garden Grove (72.1% of the 445 listings)
· 137 in Rancho Santa Margarita (70.6% of the 194 listings)
· 159 in Lake Forest (69.4% of the 229 listings)
· 38 in Foothill Ranch (69.1% of the 55 listings)
· 129 in Buena Park (60.8% of the 212 listings)
· 128 in La Habra (59.3% of the 216 listings)
· Totaling 2,509 of the 5,499 in all of Orange County

With the exception of La Habra (an expected market time of 4.6 months) all of these areas have expected market times at 3.32 months or lower, a SELLER’s market. For all of Orange County, foreclosures make up just 10% of the distressed market inventory and have an expected market time of 1.22 months, a deep seller’s market. Short sales make up the remaining 90% of the distressed inventory and have a skewed expected market time of 6.92 months, what would normally be a buyer’s market. However, ask any buyer actively looking for a home in the current marketplace and most short sales have an agreed upon contract between a buyer and seller and yet the home is still actively marketed. This is due to the fact that there really is not a pending sale until the lender (or lenders) in a short sale agrees to decrease the outstanding loan balance in order for the sale to take place. Short sales are “subject to the lender’s acceptance” because the seller owes more than the home is worth and they necessitate the lender forgiving some of the loan balance. So, even though a short sale may be on the market as an active listing, there is a high probability that a consummated contract has already been submitted to a lender. Thus, demand, a willing and able buyer, is actually much stronger than the current 6.92 month mark suggests.

How should sellers approach the current market? We are moving into the Holiday market where we can expect demand to drop further with plenty of competition sticking around. Distressed properties have no alternative and will remain on the market no matter what. So, if you are a homeowner contemplating placing your home on the market, be prepared for a lot of competition and fewer buyers in the marketplace. As a homeowner with equity, the absolute best bet is to hold onto your home for the next few years and allow for the market to eventually stabilize and reverse course. Homeownership has historically always been a super long term investment. To sell at the bottom is not wise unless a homeowner is moving up to a higher range. The Spring market, typically marked with the strongest demand of the year, does not begin until the end of January, 2009. But, make no mistake, values are not going to be appreciating from now until then and they will not be appreciating anytime next year as well. Instead, we will eventually reach equilibrium in the market where prices will just hold steady, most likely towards the end of Spring. Carefully pricing a home is fundamental to achieving success in selling in today’s market. Sellers need to be acutely aware of their location and condition in arriving at their asking price. A seller does not have control over their location, and the location needs to be carefully factored into the price. Sellers do have control over their condition and amenities. Sellers should also prepare their homes to sell and be certain that their homes are in showing condition each and every day, regardless of the amount of time it takes to sell their home. You never know when the buyer that wants to buy your home will walk through your door.

How should a buyer approach the current market? Buyers can either take heed of the following warning or learn their own lessons through the school of hard knocks: there is tremendous competition in the lower ranges, especially regarding distressed properties. Understand that the sales to list price ratio is very close to 100% for distressed properties. I have heard countless stories of buyers writing offers at 10% to 20% off of the list price, only to be burned by another buyer (or buyers) willing to pay at or close to the list price. For lower ranges and the distressed inventory, multiple offers are the norm. After competing and losing in their effort to secure a home, many buyers are turning to non-distressed sellers with equity in their homes. Buyers may pay a little bit more, but there is less hassle and, in most cases, the condition is distinctly much better. Buyers looking for a short term purchase should just rent. If a buyer plans on staying in a home for several years, then it is a great time to buy. Low rates, lower prices, improved affordability , and with the lower ranges showing definitive signs of an eventual recovery, it is a great time to buy and hold. Eventually the market will turn and you will have purchased at a much slower, opportune time.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Orange County Housing Report: Brisk Activity Despite the Financial Crunch

2008-10-21T16:15:00.000-07:00

October 16, 2008
Despite stock market gyrations and all eyes on the international financial crunch, current demand is still much stronger than the last two years. Demand, the number of new pending deals within the prior 30 days, would be even stronger right now had interest rates not bumped up significantly over the past week. Since higher interest rates are the last thing our government desires, they will continue to exercise all of their powers to stabilize the financial system until it starts showing signs of recovery. The first major sign is going to be lower interest rates, much lower. I don’t ever recall government intervention in the financial system like we are experiencing today. Starting on September 7th, a little over a month ago, the federal government took over both Fannie Mae and Freddie Mac. From that point forward, our government has been working feverishly on thawing out the frozen financial markets. Unfortunately, the financial crunch started in August of 2007; so, they are a little bit late to the party. Yes, they tinkered a little bit over the past year, but it just was not enough to thaw the financial system. Their tardiness has everything to do with the severity of the current financial crunch. The system will mend, it just will take longer than if they had made their sweeping changes six months ago. Some argue that the government should do nothing and let the markets correct on their own. They logically blame investment houses who invested with no caution, banks willing to loan anybody with a pulse and buyers willing to purchase homes utilizing loans that they simply could not afford after their adjustable rates reset. However, even with minor tinkering over the past year, both the United States and INTERNATIONAL financial markets have come to a virtual standstill. So, letting the markets work themselves out is not the remedy to the current situation in order to avert a major international disaster. The time to act was a year ago when the crunch was in its infancy. The government has always been reactionary in nature; and, now that the crisis has grown to an unprecedented level, everybody is now ready to do whatever it takes to turn our economic engine around. So, the recent acceleration in government action is not only expected, it is only the beginning of sweeping changes to thaw the financial markets.

So, how do the numbers look? Demand dropped by 174 homes in the past two weeks to 2,673 pending sales. For proper perspective, there were only 1,175 pending deals a year ago, 1,498 fewer. The big difference over the past year is that pricing has finally dropped to an affordable level where first time home buyers and investors have reemerged. One can only imagine how much stronger demand would be if financing was more readily available. Two years ago demand was at 2,011 pending deals, 662 fewer than today. The current active inventory dropped by another 218 homes in the past two weeks to 12,722. There were an additional 5,037 homes a year ago, totaling 17,759. Two years ago the inventory was at 15,263 homes, 2,541 additional homes compared to today. The expected market time increased slightly from 4.55 months two weeks ago to 4.76 months today. In comparison to the past two years, the expected market time is at a much healthier level. Last year the expected market time was at 15.11 months and two years ago it was at 7.59 months. Demand is much hotter in the lower ranges, detached homes and condominiums below $750,000. Below $500,000, 50% of the active inventory and 69% of demand, the expected market time is at 3.43 months. Between $500,000 and $750,000, 19% of the active inventory and 19% of demand, the expected market time is at 4.83 months. From there, it jumps to 5.27 months from $750,000 to $1 million. After that it jumps to double digits, a deep seller’s market. Above $750,000, demand is much lower due to the effects of the financial crunch. In order to secure a jumbo loan, currently all loans above $729,750, buyers need to have a healthy down payment, almost perfect credit, the ability to document everything and the willingness to accept a much higher interest rate compared to conventional buyers.

Distressed homes, foreclosures and short sales, dropped from 43.3% of the inventory two weeks ago to 42.9%. The total number dropped by 144 homes, bringing the total to 5,453. The distressed inventory peaked on August 7th at 5,950 homes and has dropped slowly ever since. The biggest contributing factors are the fact that the number of subprime resets has been steadily dropping coupled with a low unemployment rate. There is a lot of buzz centered on the “next wave” of resets, Alt-A adjustable. But, this group is a bit different since there are fewer of them and the government has been working on programs to help homeowners refinance their homes and continue making payments (homeowners are penalized for selling early and must share in any appreciation with the FHA). So, more distressed homes will continue to come on the market throughout the rest of the year and into 2009, yet the number will continue to slowly diminish over time. As the government programs unfold and the financial markets thaw, demand will continue to rise and stabilize the Orange County housing market long term.

How should sellers approach the current market? It is extremely apparent that discretionary homeowners who have equity in their homes are acutely aware of the current market conditions and place their homes on the market with full knowledge that competition is brisk. Lenders are in absolute control of the market. They may account for 42.9% of the inventory, but they also account for 64.2% of demand. That means that only 35.8% of demand is devoted to homeowners with equity. More and more non-distressed homeowners are opting to pull their homes off the market since the Spring and Summer markets are now in the past. If you are a non-distressed homeowner contemplating placing your home on the market, exercise extreme caution. Move up sellers tend to do better than move down sellers. After markets recover, hypothetically, if homes appreciate 5%, higher ranges realize a larger gain in terms of net dollars. 5% of $500,000 is $25,000; 5% of $800,000 is $40,000. In today’s market, homes that back up to busy streets, or back up to power lines, or are in poor showing condition, take a major hit in terms of value. If a buyer has the choice between two similar homes, one that backs to a busy street and one that does not, they are only willing to look at the home that backs to a busy street if the price is substantially less. In an appreciating market with no competition and very little available, a home that backs to a busy street will fetch a much higher price. So, sellers need to be acutely aware of their location and condition in arriving at their asking price. A seller does not have control over their location, but they do have control over their condition and amenities. Sellers should also prepare their homes to sell and be certain that their homes are in showing condition each and every day, regardless of the amount of time it takes to sell their home. You never know when the buyer that wants to buy your home will walk through your door.

How should a buyer approach the current market? It is hard to imagine, but the lower ranges in many cities are actually experiencing stiff competition. That holds true for most foreclosures and short sales. Foreclosures are currently experiencing an expected market time of 1.22 months, a major sellers market. Multiple offers are the norm and most sell at their list price or for even more. Short sales, homeowners with outstanding loans that total more than their current market value, are much different since most are on the market as active listings even thought they have already consummated an acceptable written offer between a buyer and seller. The reason they are still actively marketed: they are awaiting the lender’s written approval to allow the seller to pay off less than the loan amount. This process can take anywhere from days to months. Buyers quickly realize that lower prices result in increased competition. After competing and losing in their effort to secure a home, many buyers are turning to non-distressed sellers with equity in their homes. Buyers end up purchasing a home that is in better condition and they typically do not have to compete to purchase. Buyers looking for a short term purchase should steer clear of the current market. This is the perfect time to purchase for buyers that plan on being in their home for a minimum of several years. Even if housing values drop in the short term, Orange County housing values have proven to be an excellent long term investment. So, buyers should isolate the perfect house for their family and make it their “home” with full knowledge that in time, their “investment” will appreciate.

If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Orange County Housing Report: Inventory Drops Below 13,000

2008-10-06T10:27:00.000-07:00

The Orange County active listing inventory dropped to its lowest point in 18 months, dipping below the 13,000 mark. Typically, the Autumn market begins to drop after reaching a peak during the Summer, but not this year. The current active inventory in Orange County has dropped by 642 homes in the past month. Last year at this time the active inventory was at 17,759 homes, 4,819 additional homes, or 27% higher. Two years ago it was at 15,482 homes, an additional 2,542, or 16% higher. We started the year at 14,724 homes, 1,784 more than today. The active listing inventory has been dropping since July and it picked up steam in August. In mid-April, the inventory peaked at 15,566, 2616 additional homes compared to today. The inventory has dropped 17% in that time. During the same timeframe in 2006 and 2007 the inventory actually increased by 37% and 20% respectively. This can be attributed to stronger demand and discretionary homeowners. Demand has surged with an appreciable drop in home pricing, especially in the lower ranges where there are more distressed properties and much more first time home buyer activity. Affordability has been reintroduced to the Orange County housing market. This is simple Economics 101, as prices fall, demand rises and the number of sales increases as a result. As the United States government fixes the financial system and money starts to flow again, we can expect rates to drop considerably, including in the Jumbo loan arena, homes above $700,000. Falling rates lowers monthly payments, which is similar to falling prices. We can expect demand to increase and the number of sales to increase as well. This may be six months from today, so right now is probably the most opportunistic time to be a buyer. I recall back in 1995 many were still predicting a continued slide to values reached in the 1980’s. I am hearing the same drum beat again, this time calling for prices to fall to mid-1990’s levels. I would be careful if I was a consumer on the sidelines waiting for a much more appreciable drop. Prices took their biggest drop from August of 2007 through March of this year. There is so much demand in the lower ranges and in many areas that pricing is a little stickier, much different than the freefall I just described. Another contributing factor to the drop in the inventory is the fact that homeowners understand the current market situation and, for the most part, homeowners with equity are steering clear of the market, opting to not compete with the distressed inventory. The discretionary sellers that do enter the market do so with the understanding that the process may take a while. Now that the Spring and Summer markets are behind us, many sellers have decided to pull their homes off the market and sit on the sidelines until Spring of next year. The discretionary seller in today’s market is a harsh contrast to the majority of unrealistic sellers with high expectations of the Spring and Summer of 2006 and 2007. It takes the right mindset to be successful in competing with so many distressed homes. There is plenty to consider in selling today: location, upgrades, condition, the ability to answer quickly (unlike foreclosures and short sales), the local market and pricing, carefully considering the difference between a distressed sale and a non-distressed situation. Now more than ever, it is absolutely essential for sellers, and buyers, to enlist the help of an experienced, proven REALTOR® to navigate through this market with a successful outcome.

So how do the rest of the numbers look? Demand, the number of new pending sales within the prior 30 days, dropped by 127 homes in the past two weeks, but matched the level reached two weeks ago at 2,847. HOWEVER, the disparity between this year and the last two years continues to grow, indicating that the current market is healthier and more robust in comparison. And, demand has almost eclipsed 2005 levels! Demand is 156% stronger than last year (152% two weeks ago) and 43% stronger than two years ago (34% two weeks ago). In 2007, demand was only at 1,113 pending sales, 1,734 fewer than today. In 2006, demand was at 1,991, 856 fewer than today. In 2005, demand was at 2,868, 21 additional pending sales, less than three-quarters of 1% difference. This is a very good sign for the Orange County real estate market as a whole.
With both inventory and demand dropping, the expected market time increased slightly from 4.43 to 4.55 months. Still, the current market time is another unbelievable contrast to the 14.97 months mark established at the beginning of this year. Last year the expected market time was at 15.96 months and two years ago it was at 7.78 months. This is a reflection of a healthier market in comparison to prior years due to better pricing, higher demand and discretionary homeowners.

The disparity in Total Pending Sales, a statistic that I started tracking back in September of 2006 to show ALL pending activity and not just the past months activity (demand), from last year to this year continues to grow unabated. The disparity has grown to 170% greater than last year. Today it stands at 4,276 total pending sales. Last year the total pending count was at 1,581, a difference of 2,695. This is yet another unbelievable contrast to just one year ago.

Even though the distressed inventory has been dropping, it has not dropped as swiftly as the discretionary seller inventory; thus, the percentage of distressed homes on the market has actually increased over the past month. A month ago there were 5,744 distressed homes on the market, foreclosures and short sales, representing 42.3% of the market. Today there are 5,597 distressed homes, 147 fewer than four weeks ago, representing 43.3% of the overall active inventory. Any drop in the distressed inventory is a welcome sign for the Orange County housing market because it establishes that even as more distressed homes come on the market, they are actually going off the market faster. We can expect the distressed market to be a major player in the marketplace throughout the rest of this year and 2009 as well. For the rest of the year, demand will continue to drop slightly as will the active listing inventory. After the Autumn market and Holiday market, from Halloween through the first couple of weeks of the New year, housing demand has the potential of taking a larger bite out of the distressed inventory and could, ultimately, finally stabilize the market. I am not referring to the heydays of a few years ago with rapid appreciation; instead, I am referring to more of an equilibrium, where demand meets the supply and prices no longer drop. An equilibrium calls for a stabilization of pricing with very little change in one direction or another. If you are a buyer looking for a distressed home to purchase, please know that you have a lot of company. Distressed homes in great condition and a great location attract many buyers and generate multiple offers. Be prepared to compete.

If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

http://www.alteraproperties.com/

Market Time Report: Demand is Up

2008-09-23T09:47:00.001-07:00

Demand has broken away from the normal Autumn cycle and is up for the start of the season. Typically, demand, the number of new pending sales within the prior 30 days, starts a slow decline at the beginning of the Autumn market, but not this time. Demand marched to the beat of its own drum and did not follow the normal real estate cycles for the first half of this year, growing unabated. Then, in June, demand started to track the normal cycle, falling in July slightly and then increasing throughout August. If demand was to follow a normal Autumn cycle, it would have dropped slightly. However, demand increased by 127 homes in the prior two weeks and now totals 2,974 pending sales. Not only is demand far surpassing the prior two years, but it is swiftly approaching 2005 numbers. Demand is 152% stronger than last year and 34% stronger than two years ago. Last year at this time there were only 1,180 pending sales, 1,794 fewer than today. Two years ago there were 2,208 pending sales, 766 fewer than today. In 2005 there were 3,058 pending sales, 84 additional compared to today, a 1.7% difference. This change in the demand cycle was totally unexpected. It remains to be seen just how long this unconventional pattern will continue; nonetheless, it is a very good sign for the Orange County real estate market as a whole.

The active listing inventory has broken from all cyclical patterns for the entire year. After a slight initial increase in the inventory for the first couple of weeks of the year, it remained at a plateau for the first half of 2008. June and July was marked by a slow descent in the inventory. But, ever since the beginning of August, the inventory has been rapidly dropping, shaving a total of 1,572 homes since July 25th. In the past month alone, the inventory has dropped by 885 homes. Today the active inventory stands at 13,174 homes compared to 14,059 a month ago, a 6.3% drop. Last year at this time the active inventory actually increased by 17 homes within the prior four week period. Two years ago it dropped by 334 and three years ago it actually climbed by 830 homes, the beginning of the real estate slowdown. So far in 2008 the active inventory dropped from 14,944 at the beginning of the year to 13,174 homes today, an 11.8% decrease.

With demand increasing and the active inventory dropping, the expected market time has actually dropped to its lowest point of the year, 4.43 months. The market is in much better shape compared to the beginning of the year when the expected market time was at 14.97 months. Back then demand was at 998 pending sales and the inventory was at 14,944 homes. Last year at this time, the beginning of the financial crunch, the expected market time had blossomed to 15.17 months, 242% longer than today. Two years ago, the expected market time was 7.10 months, 60% greater than today. This market is so different compared to the past couple of years. This can be attributed to the distressed market and financial crunch pressuring pricing to the point where Orange County homes became more affordable and attracted many first time home buyers and, now, investors. As home prices align closer to rents, investors are starting to enter the market again. The stronger market can also be attributed to non-distressed home owners utilizing their discretion and ultimately deciding to not compete and sit this current market out. Slowly but surely more home owners are staying put and are realizing that their homes are not just an asset to be flipped every two to three years. Their address is “home,” a place to raise a family and create memories that will last a lifetime. Homes should be bought and sold with the understanding that, first, a home is a place to raise a family and, second, a great LONG TERM investment. That will very likely be a lasting legacy of this current downturn.

The disparity in Total Pending Sales, a statistic that I started tracking back in September of 2006 to show ALL pending activity and not just the past months activity (demand), from last year to this year continues to grow unabated. A month ago today’s total pending sale count was 105% greater in comparison to 2007. The disparity has grown since to 157% greater than last year. Today it stands at 4,393 total pending sales, the highest point of the year, surpassing the previous high of 4,363 established on June 26th. Last year the total pending count was at 1,710, a difference of 2,683. So, the current market may be filled with its set of challenges, but they pale in comparison to where the market was a year ago.

Distressed properties, foreclosures and short sales, make up a major portion of today’s Orange County real estate market. With the inventory dropping due to homes placed into escrow and many discretionary sellers pulling their homes off of the market, the percentage of distressed homes on the market has grown a little bit over the past month. A month ago distressed homes made up 41.7% of the overall active inventory versus 42.9% today. However, the total number of distressed homes on the market has actually dropped in that same time period by 215 homes, from 5,865 to 5,650. Current demand is exhausting the continuous stream of new distressed homes that are placed on the market and even driving it down a little bit. The expected market time for foreclosed homes is at 1.18 months, a seller’s market. So, if you are a buyer looking for a “deal,” do not expect a foreclosure to sell for much less than the asking price. There is so much demand for foreclosures that most are securing multiple offers, and many are actually sold above the asking price. Short sales are a little bit of a different story with an expected market time of 6.2 months, but don’t let that number fool you. Many short sales that are a part of the active listing inventory have actually secured many offers, they have an agreed upon contract between the buyer and seller, and the accepted contract has been submitted to the lender(s) for “lender approval.” These listings are waiting for the formal “lender approval” before starting the escrow process and pulling the home off the market with a pending status. So, the 6.2 month expected market for short sales is definitely inflated and should be at or below about the three month mark.

Where do we go from here? Back in July I told everybody to expect to hear more regarding resurrecting the Resolution Trust Corporation (RTC) to help stabilize the current housing dilemma. Well, two month later and they are now formulating something very similar to the RTC. The RTC was formed in 1989 to "bail out" the rapidly deteriorating financial market due to the insolvency of savings and loan associations. Today, a similar agency would purchase bad debt of distressed, owner-occupied homes at a discount from the debt holder and restructure the loan for the owner in areas hit hard by foreclosure activity. This in turn would ultimately stabilize the current financial crunch. This will not flip the switch to a better market overnight, but it will get us back on track over the course of time. It will ultimately restart the financial engine that drives our economy and repair the ailing housing market.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Just Listed in College Park Area of Irvine

2008-09-12T21:22:00.001-07:00

Lowest priced single family home in desirable College Park area of Irvine. Great floorplan features 4 bedrooms, 2.5 baths and a large bonus room upstairs. Master bedroom and bath have been updated featuring a dual sided fireplace, granite counters, newer shower and bathtub and scraped ceilings. Spacious backyard and gated front courtyard. Home needs some TLC and has been priced accordingly. Located just down the street from the local elementary school. Three community pools, parks and playground. Low association dues and no mello roos. $645,000 Call us for a private showing at 949-370-2652

Market Time Report: Expected Market Time Remains Under 5 months

2008-09-08T12:41:00.001-07:00

September 4, 2008
With year over year demand 136% higher than in 2007 and 28% higher than 2006, it is no wonder that the expected market time is at a much healthier level. For the first half of 2008 demand increased unabated. Since mid-June, demand has followed the normal seasonal cycles. Demand first dropped to a summer low at the beginning of July and then increased until reaching the Summer market peak two weeks ago. “Back to school” marks the beginning of the Autumn market and a slow drop in demand. Demand dropped by 144 homes in the prior two weeks and 93 homes in four weeks, now totaling 2,847 pending sales. That is much better than last year at this time. Still in the beginning stages of the financial crunch that started the month before, demand dropped by 269 homes in just two weeks and 598 homes in a month. Demand dropped to historical lows and totaled only 1,206 pending sales, a difference of 1,641 compared to today. Two years ago, demand dropped by 141 homes in the prior two weeks and totaled 2,216 pending sales, 631 fewer than today. So, in regards to demand, we are currently on much better footing compared to the prior two years.

The active listing inventory has broken from all traditional cycles due to discretionary homeowners steering clear of the current market, choosing to not compete with lenders, who control 42% of the market through foreclosures and short sales. Typically, the active listing inventory climbs throughout the Summer, as many homeowners place their homes on the market to take advantage of the Summer selling season, often mistaken as the best time of the year to market a home (it is actually the Spring market). In 2007, the active listing inventory grew from 11,643 homes at the beginning of the year to 17,760 homes this time last year, a 53% increase. In 2006, the active listing inventory grew from 7,635 homes at the beginning of the year to 15,767 homes this time two years ago. In 2008, the active inventory dropped from 14,944 at the beginning of the year to 13,582 homes today, a 9% decrease. And, most of the drop has actually come recently, with a decrease of 3.4% in two weeks and 5.3% in the past four weeks.

So, even though demand has dropped a bit in the past two weeks, the subsequent drop in the active listing inventory has enabled the expected market time to remain virtually the same, increasing only slightly from 4.70 months to 4.77. Four weeks ago the expected market time was at 4.88 months. So, not a lot has changed in respect to market time. Last year at this time, the expected market time had burgeoned in a four week span from 9.76 months to 14.73. Two years ago, the expected market time was 7.12 months. In regards to expected market time, once again we are on much better footing compared to the prior two years.

The disparity in Total Pending Sales, a statistic that I started tracking back in September of 2006 to show ALL pending activity and not just the past months activity (demand), is continuing to grow substantially. The current total pending sales count dropped by 129 homes in the past two weeks, but only dropped by 28 homes in the prior four weeks, now totaling 4,220 pending sales. In 2007 at this time, there were only 1,813 total pending sales last year and a drop of 300 in two weeks and 648 in four weeks. So, compared to last year, total pending sales are up 132%. Two weeks ago, the year over year comparison was at 106% and four weeks ago it was up by 72%. Total Pending Sales is yet another statistic that points to much better footing compared to the past.

As discussed earlier, distressed properties, foreclosures and short sales, make up a major portion of today’s Orange County real estate landscape. The distressed inventory exploded onto the market last year, growing unabated from July of last year through the end of May, 2008. On July 26, 2007, there were 792 distressed homes on the market, 5% of the total active inventory. The distressed inventory continuously grew through May 29, 2008, where it stood at 5,905 homes on the market, 39% of the total active inventory. Today, the distressed inventory stands at 5,744 homes, 42% of the total active inventory. The inventory has been at a plateau since the end of May and actually dropped over the past month. The distressed inventory dropped by 121 homes in two weeks and 206 homes in four weeks. This phenomenon can be attributed to stronger demand and discretionary homeowners opting to not compete. Current demand is exhausting the continuous stream of new distressed homes that are placed on the market. Where is all of this demand coming from? The rapid growth of distressed properties and very little demand from August of last year through February of this year significantly depreciated Orange County housing, especially in the lower ranges. With affordability back in the marketplace combined with low interest rates, a wave of first time home buyers, many priced out of the market for years, dove in. 78% of the active distressed home market is isolated below $500,000 and 93% can be found below $750,000. It is no wonder that there is so much demand below $500,000, representing 64% of all demand. In comparison, the range below $500,000 represents 49% of the total active inventory. Homes priced below $750,000 represent 69% of the active inventory and 86% of demand.

Where do we go from here? Our government is carefully monitoring both the housing and financial markets and is preparing to do whatever it takes to prevent a radical downturn. The United States Treasury is preparing to take over both Fannie Mae and Freddie Mac to stabilize the conventional lending market, currently all loans below $729,750 in Orange County (this will drop to $625,500 in high cost areas). Investors have turned their collective heads away from Fannie and Freddie, but with the United States taking over, the risk of them failing drops out of the equation completely. This ultimately will strongly encourage investors from around the world to once again invest in these secondary mortgage market entities, which will allow interest rates to drop to lower levels. In this scenario, consumers looking to purchase or refinance win. Housing demand wins. The government is not afraid to intervene. They will carefully plot a course to restore the credibility of the both the financial markets and the American Dream, homeownership.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Market Time Report: Current Demand Double 2007 Levels

2008-08-27T09:52:00.001-07:00

The year over year comparisons in Orange County housing demand are growing more unbelievable by the day. Current demand is 103% greater than one year ago at this time. Demand, the number of pending sales over the past month, increased by 51 homes in the past two weeks to 2,991. In the past month, demand has increased by 258 pending sales. In sharp contrast, one year ago demand was at 1,475 after dropping by 329 pending sales in just two weeks. That marked the absolute beginning of the credit crunch. We are still feeling the effects of the credit crunch today, especially in the upper ranges involving jumbo loans; however, the current severity pales in comparison to the initial six months of the crunch. From August 2007 through February 2008, demand trickled in as financial institutions, the Federal Reserve and all of Washington DC clamored to apply as many fixes as possible to jumpstart the financial system. The crunch is currently not as severe, but it will continue as the strain of record defaults and foreclosures weighs down financial institutions around the world. Even though the crunch is affecting the market, demand is much healthier today compared to 2007 and 2006. Current demand is not only 103% higher than 2007 levels, it is 27% higher than 2006. It is amazing that this is occurring within an environment that is handcuffed by extremely tight regulations and new lending standards. The disparity in Total Pending Sales, a statistic that I started tracking back in September of 2006 to show ALL pending activity and not just the past months activity (demand), is growing substantially. The current total pending sales count grew by 101 homes in the past two weeks to 4,349 pending sales, compared to 2,113 pending sales last year and a drop of 348 in two weeks. So, compared to last year, total pending sales are up 106%.

Distressed properties, foreclosures and short sales, have become a major player in today’s market. As distressed propertied continued to build after the beginning of the financial crunch, prices dropped significantly and restored affordability to the market not seen in several years. First time buyers were finally able to reenter the marketplace and many fence sitters are finally jumping in as well. We read and hear about the continued mass numbers of defaults and foreclosures, but the numbers of distressed listings actively on the market has reached a plateau and has even dropped in recent weeks. This is due to the enormous appetite for affordable homes, primarily found below the $500,000 mark. Distressed homes are now being placed into escrow as fast as they are coming on the market, allowing the distressed inventory to reach its current plateau. There are 5,865 distressed homes on the market, a drop of 85 in the past two weeks. 42% of the active market is a distressed property, unchanged from two weeks ago. This level is no different than the level reached at the end of May. Prior to May, the distressed inventory was growing unabated since July of last year. 21% of the current distressed inventory is foreclosures, totaling 1,232 homes. 79% of the distressed inventory is short sales, totaling 4,663. 78% of all distressed properties are found below $500,000 and 93% are below $750,000. The number of distressed properties in the upper ranges pales in comparison to the lower ranges. For those looking to find a great “deal” by offering to purchase a property far below the asking price of a distressed home, good luck. Your chances are much greater in winning the California lottery. Many have the attitude of nothing ventured, nothing gained, but the statistics just are not on their side. The sales to list price ratio, how close a home is sold compared to the asking price, is between 99% and 100% depending upon the price range. Most distressed homes receive multiple offers and many sell for higher than the asking price. Buyers need to keep in mind that prices have already dropped drastically; in essence, they are already getting a “deal.”

So, what does the rest of the data look like? The active listing inventory has shed 289 homes in the past two weeks and 687 over the past month and now totals 14,059, the lowest level since April 5, 2007. While in the initial stages of the financial crunch, back in December, I felt that the inventory could blossom to 20,000 homes. Instead, discretionary sellers who have equity in their homes decided, for the most part, to skip this market and not place their homes on the market and compete with the onslaught of distressed properties. Also, with a significant drop in pricing and an increase in affordability, demand has also eaten into any potential increase in the inventory. Last year at this time the inventory posted its second highest mark of the year of 17,881 homes, 3,822 additional homes, or 21% higher, compared to today.

Two years ago the inventory posted its highest mark for 2006 of 16,006, 1,947 additional homes, or 12% higher, compared to today. The expected market time for Orange County dropped from 4.88 months two weeks ago to 4.70 months today. The expected market time in 2007 had blossomed to double digits for the first time, 12.12 months, and would remain in double digits until February of this year. Two years ago the expected market time was at 6.79 months. It is easy to conclude that even with the giant negative spotlight on the financial markets and distressed properties, the Orange County housing market is at a much healthier place compared to the past couple of years and is on the road to an eventual recovery.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Market Time Report: Distressed Homes Ignites Demand

2008-08-11T15:24:00.001-07:00

Fueled by the value and affordability of foreclosures and short sales, demand below $500,000 has swelled to its highest level of the year. Total Orange County demand now exceeds last year’s level by 63% and 2006’s level by 26%. Demand, the number of pending sales over the past month, increased by 197 in the past two weeks to 2,940. After unstoppable growth in the first half of 2008, demand is now following a typical summer cycle. For the first couple of weeks it diminished from June’s record highs and has continued to grow ever since. Typically, demand then starts to drop with the beginning of the Autumn market and the beginning of the school year. However, with the distressed inventory continuing to replenish, value and affordability may continue to provoke demand through the end of the year. Our agent reports from the streets indicate that fence sitters for the past couple of years, and even investors, are sensing a great opportunity to enter the market. 64% of demand, 1,892 pending sales, is found below $500,000, compared to 30%, 537 pending sales, one year ago. In looking at the chart, it is important to note that the beginning of the financial crunch took place in August 2007. As lenders tightened their requirements overnight, demand dropped by 18% in just two weeks and by 33% in a month. Demand dropped to a trickle and lasted six months. There will be no repeat this year. Value and affordability is a major difference in comparing 2008 to 2007, fueled by a major drop in prices due to that six month abyss. It will be interesting to see where Orange County demand travels from here. It may very well start doing its own thing just as it did at the beginning of the year, breaking from the traditional cycle of diminishing through the Autumn and Holiday markets and either sustaining its current levels or, shockingly, even increasing. Sprinkle value and affordability along with waiting on the fence for a few years and you have ingredients that will at the very least continue to spark demand. Time will tell.

So, what does the rest of the data look like? The active listing inventory has shed 398 homes in the past two weeks, bringing it to the lowest level of the year, 14,358. The inventory continues to buck the trend of growing through the Spring and Summer markets. Instead, it has remained just below the 15,000 mark for most of 2008 until its recent drop, bringing it closer to the 14,000 threshold. At the beginning of the year, with demand at such a historically low level, I pessimistically thought that there was a good chance that the inventory could swell to 20,000. However, two things occurred: demand increased unabated and discretionary, non-distressed homeowners remained off the market and nobody tested the waters like prior years. Unlike 2006 and 2007, absent this year was any foolish anticipation of a phenomenal Spring market. 14,358 homes on the market is still high, but it is a lot less pressure on pricing and demand compared to 20,000 homes. Last year at this time the inventory had blossomed to 17,611, 19% higher compared to today, or 3,263 additional homes. Two years ago, the inventory had grown to 15,875, 10% higher, or 1,527 additional homes. The expected market time for Orange County dropped from 5.38 months two weeks ago to 4.88 months today. The expected market time in 2007 was 9.76 months, almost double, and in 2006 it was at 6.81 months. The distressed home market, foreclosures and short sales, now accounts for 41% of the active inventory and 57% of demand. The distressed inventory grew by 56 additional homes in the past two weeks. An interesting statistic is the portion of distressed homes in the various ranges in comparison to a year ago. Last year 55% of all distressed homes were found below $500,000 and 92% were below $750,000. Today 78% of all distressed homes are located below $500,000 and 94% are below $750,000. It is easy to conclude that the distressed inventory is driving demand. As painful as the distressed inventory has been to pricing, that erosion in pricing has not only brought affordability and value back into the Orange County housing market, it has planted the seeds to an eventual housing recovery.

Total Pending Sales, a statistic that I started tracking back in September of 2006 and revealed for the first time a month ago, are now at 4,248, a decrease of 22 homes. Remember, this statistic is different than demand, which shows the prior month’s activity. These are TOTAL pending sales, including those that have been pending for months. Compared to last year, total pending sales are up 73%. The year over year discrepancy continues to grow. Four weeks ago, total pending sales were up 61% compared to 2007. The markets are moving in opposite directions. Last year, total pending sales reached only 2,461, 1,787 fewer. Current sold homes not only surpass 2007 levels, it now eclipses 2006 levels as well. The number of sold homes has continued to grow unabated ever since March. The trend is almost identical to demand, the only difference, an apparent 60-day lag in the sold numbers compared to demand.

It is time, once again to clear up the misconception in the short sale market. Short sales occur when a seller can no longer afford their monthly obligations and their outstanding loan(s) exceed the current market value. The seller must be able to document that they truly have a hardship, that their total outgoing monthly bills exceed their monthly income and they do not have a large savings or other source of capital. When this occurs, the homeowner places their home on the market subject to lender approval. Thus, even though the buyer and seller may agree upon price and terms, the pending sale does not close until formal lender approval (and in many cases, more than one lender). HOWEVER, this is where the misconception occurs: a majority of short sales are on the market as active listings even though they already have received an offer, and often multiple offers, and have submitted a ratified contract to the lender(s). They remain as active until they obtain formal lender approval. This is due to a contract that is signed by both the buyer and seller that allows the seller to continue to market the home until lender approval. Unfortunately, this process can take anywere from weeks to months. The end result, buyers encounter homes that already have had tremendous activity and generated many offers. In most cases, short sales are just as popular as foreclosures due to their affordability and value. There are 1,249 active foreclosures on the market and demand for them is at 1,034, representing an expected market time of 1.21 months. In comparison, there are 4,701 short sales on the market. With reported demand for short sales at 656 pending sales, the expected market time is at 7.17 months. This is grossly understated because so many go unreported. Thus, it is hard to navigate among all of the active short sales. The bottom line, expect a lot of competition and activity when dealing with both foreclosures AND short sales.

If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Market Time Report: Demand 50% Stronger Compared to Last Year

2008-07-28T17:19:00.000-07:00

The surge of first time home buyer activity has equated to tremendous demand in the lower end of the market. Demand surpassed last year’s level by 51% and 2006’s level by 23%. Demand, the number of pending sales over the past month, now totals 2,743, an increase of 61 over the prior two weeks. For the first half of 2008, demand ignored conventional trends, growing week after week, uninterrupted. That changed at the very end of June and beginning of July where demand is now following a normal summer cycle. Demand should continue to increase slightly through the rest of the summer and dip slightly in September, the beginning of the Autumn market. Last year at this time demand was at 1,822 pending sales, 921 fewer. Two years ago it was at 2,235, 508 fewer. This wave of first time home buyer activity has been fueled by the volume of the distressed home market, foreclosures and short sales (homeowners who have outstanding loans that total more than the current market value of their homes). The distressed home market accounts for 40% of the active inventory and 51% of demand. This market has afforded tremendous opportunities for buyers and has quickly eroded prices, increasing home affordability, and, ultimately, fueling the spike in demand this year. Total Pending Sales, a statistic that I started tracking back in September of 2006 and revealed for the first time in the last report, is now at 4,270, an increase of 78. Remember, this statistic is different than demand, which shows the prior month’s activity. These are TOTAL pending sales, including those that have been pending for months. Compared to last year, total pending sales are up 66%. That comparison was up 61% two weeks ago, so the disparity is growing. Last year, total pending sales reached only 2,575, 1,695 fewer. The bottom line: there are many distressed homes on the market and prices have dropped; however, demand is much, much healthier than last year.

I have read so many reports, forecasts, predictions and prognostications that it would make your head spin. They run the gamut, from the ridiculous, the next Great Depression, to the absurdly optimistic, that the market will improve in the second half of 2008 and accelerate in 2009. I have heard that prices may fall as low as the mid-1990’s, which is utterly ridiculous and ignores too many economic fundamentals. I think the real problem is that in the information age, there’s just too much information. If you Google news articles for “housing,” there are 187,126 articles within the last month. Fact: a majority of the subprime resets will have concluded by year’s end. Fact: prime adjustable resets will be next. Conventional wisdom tells us that this will not be nearly as devastating as subprime. In sifting through all of the information and data, and drawing from my quantitative economics and decision sciences background, I think we can expect more of the same. That means we can expect increased demand in the lower ranges due to affordability; increased pressure on pricing in the upper ranges due to the lack of financing, distressed properties staying at or close to their current plateau of under 6,000 active listings (currently 40% of the market), and discretionary homeowners with equity avoiding selling unless they absolutely must sell. We will most likely realize a normal, slight, cyclical drop in demand in the Autumn and an even further drop with all of the distractions of the Holiday market, from Halloween through the first couple weeks of the new year. In 2009, distressed properties will begin to drop from its plateau in the middle of the year, as the last of the subprime tsunami is absorbed. Yes, there will still be distressed properties from the prime and subprime sectors, just not at the rate that we have all become accustomed to seeing. 2009 will be the year we absorb the distressed properties. Right now, the problem is that the homes coming off the market due to increased demand in the lower ranges are constantly being replaced by a fresh, steady stream of distressed properties. As the tap of distressed properties is turned down at the beginning of 2009, demand will finally have an opportunity to erode the inventory and further stabilize the market. This is of course if there are no hidden surprises. For example, the naysayers are quick to point out that I thought the last Holiday market would be a great time to buy. However, I was stating that prior to the surprise beginning of the financial crunch in August of 2007. But I was not alone. Nobody accurately predicted that the entire international financial markets would become frozen overnight. But, the likelihood of another surprise of the magnitude of the financial crunch is very small. Many forecasts and predictions fail to take into account that Congress, the Federal Reserve, the White House, and financial institutions are doing everything in their power to reverse the trend in housing and stabilize the market. Oil, food and housing have become such a drag on the economy that EVERYBODY is going to do whatever it takes to bring stability. Congress is working on a bill right now that addresses a permanent change to the increased conventional and FHA loan limits, a first time home buyer credit, and foreclosure relief.

So, what does the rest of the data look like? The active inventory increased slightly in the prior two weeks by 45 homes, now totaling 14,746 homes. It continues to buck the trend to grow during the Summer market and has remained at its current level for all of 2008. Last year there were 2,850 additional homes on the market after adding 262 homes in two weeks. In 2006, there were 989 more homes on the market after adding 377 homes in two weeks. The current active inventory is obviously not following a normal cycle. The expected market time dropped slightly from 5.48 to 5.38 months. In comparison, last year the expected market time was 9.66 months and it was 7.04 months two years ago. The distressed home inventory, foreclosures and short sales, dropped by the largest amount in the past two weeks, 59 homes, and remained 40% of the overall active inventory. Remember, there is a lot of competition for distressed properties, with most fetching multiple offers, and there are still many selling for above their asking price. The current expected market time for foreclosures is 1.42 months. 21% of the distressed inventory is foreclosures. In comparison, 79% are short sales. The market time for short sales is 8.52 months. However, this is not really the “expected” market time since so many short sales remain on the market until they receive formal lender approval on the sale. One of our associates highlighted an offer that had been accepted by the seller and submitted to the lender for eight months before receiving lender approval. The home remained active on the market the entire eight months, even though they had a buyer and seller that agreed upon the contract. So, expect competition on short sales too.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Market Time Report: June 2008 Closed Sales 11% Better than June 2007

2008-07-14T13:26:00.001-07:00

The big story for the Orange County real estate market is that the pace of closed sales, especially the last couple of weeks, has been brisk. According to residential resale data, there were over 220 additional closed sales in Orange County, 11% stronger than last year. After starting the first few months with demand down by over 30% compared to 2007, the trend in a slow, continual increase in demand for the first six months finally translated to better sales in comparison to 2008 for the month of June. July is shaping up to continue that trend and we can expect more of the same for the remainder of the year. I can already hear the skeptics out there pointing to the coming Autumn market and Holiday market, from Halloween through the first couple of weeks of the New Year. Yes, the real estate market will experience a cyclical slowdown during that period of time, just nothing compared to 2007. In 2007, the market was plagued by the initial stages of the financial crunch, which began in August. That initial stage lasted six months until prices fell to a point where first time home buyer demand began to rise with an enormous improvement in home affordability. Since then, the market has only been aided by the increased conventional and FHA loan limits. Right now Congress is looking to create a temporary first-time home buyer tax credit, increase the conventional and FHA loan limits permanently and expand the FHA program to provide additional authority to refinance at-risk homeowners and help prevent foreclosures. Many turn their collective heads in disgust to any form of government bailout, but everybody is coming to the quick realization that dealing with falling house prices in conjunction with rising food and gasoline prices is not a healthy mix. Be assured, that our government and the Federal Reserve will do whatever is necessary, but with measured steps. Expect to hear more regarding resurrecting the Resolution Trust Corporation (RTC) to help stabilize the current housing dilemma. The RTC was formed in 1989 to "bail out" the rapidly deteriorating financial market due to the insolvency of savings and loan associations. Today, a similar agency could purchase bad debt of distressed, owner-occupied homes at a discount from the debt holder and restructure the loan for the owner in areas hit hard by foreclosure activity. This in turn would ultimately stabilize the current financial crunch.

So, what does the rest of the data look like? For the first half of the year, the market marched to the beat of its own drum, shirking cyclical twists and turns. Demand steadily increased, the active inventory remained the same and market time progressively dropped. Then, starting a couple of weeks ago, many buyers started to enjoy the summer, vacationed, went to the beach, and they took the Fourth of July holiday weekend off. Demand responded and reacquainted itself with a normal cycle. Today’s demand reading is cyclically the lowest point of the Summer selling season and consistently drops significantly from the snapshots of demand in June. The good news for the real estate market, the demand trend line shows an increase through the end of the Summer market and peaks at the end of August. Today’s demand, the number of homes placed into escrow within the prior month, is now at 2,682 homes, dropping 324 homes from two weeks ago, an 11% drop. As tempting as that drop is for the naysayers and headline editors to embrace, demand is still 51% better than last year and 26% better than 2006. The real story is that demand is now following a normal Summer market cycle. A normal cycle calls for a drop in today’s reading compared to June. I have been tracking Orange County housing demand, a snapshot of the prior 30-days activity, since June of 2004. I started tracking an additional statistic, Total Pending Sales, beginning in September of 2006. It is different than demand, which shows the prior month’s activity. These are ALL pending sales, including those that are pending for months. Yes, some of the pending sales fall out, but the higher the number, the more that become closed sales. At the beginning of the year, the total pending count was 34% less than the beginning of 2007. Today, the total pending count is at 4,192 compared to 2,606 last year at this time, that’s 61% higher. The bottom line, demand is much healthier today due to increased home affordability and the wave of first time home buyer activity.

The active inventory still refuses to follow a normal cycle. Cyclically, Sellers mistaken the Summer market as the best time to place their homes on the market, when in reality it is the Spring market. Thus, during the summer months, the inventory typically grows. In the last two weeks, the active inventory has dropped by 139 homes, bringing the total to 14,701, the lowest point of the year. Last year, there were 2,633 additional homes on the market. In 2006 there were 657 additional homes on the market. The expected market time increased from 4.98 months two weeks ago to 5.48 months today. The expected market time was at 9.73 months last year and 7.2 months two years ago. The distressed homes, foreclosures and short sales, grew by only 7 homes in the past two weeks and remains at 40% of the overall active inventory. For those looking for a distressed property “deal,” remember that lenders are in the driver’s seat and there is tremendous competition with multiple offers and homes fetching above their asking price. I was just informed of a large home in Ladera Ranch that was grossly underpriced as a foreclosure. After procuring a hoard of offers, the home is now a pending sale for a ridiculous amount over the asking price. In essence, the agent and lender created a “mini-auction” on their home with a successful outcome.If you are a seller, how do you compete? The secret to success is a great price and great condition. As a seller, the danger of overpricing is that as prices drop, there are only two options: chase the market and drop the price or pull your home off the market. To avoid chasing the market down in price, carefully arriving at the initial asking price is crucial. Lower price ranges are subject to increased competition from foreclosures and short sales. However, non-distressed home sellers have a way to differentiate from most distressed properties, condition. Most foreclosures and short sales are in poor to average condition. Under the circumstances, their motivation to keep a home in tip-top shape just is not present. Non-distressed, traditional home sellers have the ability to showcase their homes as the home in a neighborhood that stands out because it is in move-in condition. A home that is clean from top to bottom with lush green landscaping, a fresh coat of paint and even new or newer carpeting stands out. Distressed homes often have dead or no landscape and are in need of many cosmetic fixes. Most buyers require a major discount in price to compensate for the trouble to fix up a home. Sellers need to be in tune with the changing market conditions and strategically position their homes for success. For sellers in the higher ranges, above $750,000, demand has dropped compared to prior years because of the financial crunch. Financing is much harder to get in the upper ranges, cutting into demand. In these ranges, the keys to success are price, condition and a ton of patience.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Owners want this sold now!

2008-07-07T16:16:00.000-07:00

Great opportunity to own in one of Dana Points most desirable neighborhoods. This home is situated on a prime park frontage lot. Offering 4 bedrooms and 3 full baths. Owners will look at all reasonable offers. This is not a short sale!
$799,000

Market Time Report: The Inventory Drops Below 2006 & 2007 Levels

2008-06-30T12:29:00.000-07:00

Thus far, the big surprise of 2008 is the fact that the inventory has not grown this year. In fact, over the past six weeks, the inventory has been dropping. The active inventory was at 14,944 homes on January 10, 2008, my first report of the year. In comparison, today, there are 104 fewer homes, or 14,840. So far in 2008, the peak in inventory was established on March 20th at 15,617 homes, 777 additional homes compared to today. Last year at this time we were contending with an inventory that had grown by 5,607 homes from the start of 2007, growing from 11,643 homes to 17,250. The 2007 peak was achieved on September 20th at 17,898 homes. The rate of growth was even more staggering for 2006, growing from 7,635 homes at the beginning of the year to 14,946 by the end of June, a 7,311 home increase. The big difference this year compared to the prior two years is the fact that the conventional, non-distressed, discretionary home seller simply refuses to compete with the distressed inventory completely controlled by lenders, foreclosures and short sales (short sales are homeowners who owe more than their homes are worth, requiring lender approval of any sale). In January, 3,858 of the 14,944 homes on the market were distressed properties, 26% of the inventory. Today, 5,946 of the 14,840 homes on the market are distressed properties, 40% of the inventory. The non-distressed, discretionary seller inventory has dropped from 11,086 to 8,894 homes, a 2,192, a 19% drop. That is significant and has allowed the seeds to an eventual recovery to begin to germinate.

The other big story is that demand is now far better than both the 2006 and 2007 levels. Demand dropped in the past two weeks by 54 homes to 3,006 pending sales within the prior month. That is the first time this year that demand conformed to its normal cycle, dropping at the end of June. Dating back to 2004, when I first started tracking Orange County housing market numbers, demand has always dropped from mid-June to the end of June. However, demand is much stronger compared to the last two years. Last year, demand was at 1,894 pending sales, 1,112 fewer than today, or 37% less. Two years ago, demand was at 2,362, 644 fewer than today, or 21% less. Where is this demand coming from? Essentially, the lower ranges, all homes below $500,000, where the pressure from distressed homes has been greatest and eroded prices to a level where affordability has radically improved. With lower interest rates and a significant drop in prices, a bit over 20% in the prior two years, a wave of first time home buyer activity has unfolded before our collective eyes. Let’s take a quick look at demand and inventory for the $0 to $500,000 range compared to the market in total over the past few years:

Year % of Total Demand % of Total Inventory
2008 59% 48%
2007 26% 27%
2006 27% 22%
2005 30% 22%

So, this phenomena is a new element to the Orange County housing market, fueled by distressed properties and a lot of first-time home buyer activity. The word out in the field is that investors are now making their way back in the office too because prices have dropped to the point where a property will “cash flow,” meaning that the monthly cost is more than covered by the rent that is received. I personally have not heard of properties that will “cash flow” in many years. So, affordability has allowed the seeds to an eventual recovery to begin to germinate too.
What other trends can be discerned from the current data? The expected market time increased slightly over the past two weeks from 4.86 to 4.94 months. For all homes below $1 million, the expected market time is better than the last two years. All homes below $750,000 are experiencing a market time at four months, compared to around nine months last year. For homes between $750,000 and $1 million, the market time is at 6.23 months compared to 7.24 months last year. Foreclosures and distressed homes make up 40% of the active inventory, but if somebody is just looking for a foreclosure deal and does not want to deal with the hoops, delays and red tape that come along with short sales, they are in for a lot of competition. The foreclosure active inventory has remained at similar levels since mid-February, growing from 1,040 homes to only 1,171 homes. The foreclosure inventory makes up only 8% of the total market and only 20% of the distressed inventory. AND, buyers are flocking to them in droves. The current expected market time for foreclosures is down to 1.32 months, a SUBSTANTIAL sellers market. Expect multiple offers and very strong sales to list price ratio, meaning they are selling for their asking prices. The list to sales price ratio for all foreclosures is 99%. For homes above $500,000 the ratio is 100%. Yes, some do sell below their asking prices, given the condition and area; but, many sell well above their asking prices. Also, you can expect that the higher the range, the fewer number of foreclosures. 86% of all foreclosures are below $500,000 and 97% are below $750,000. If you are looking for that foreclosure “deal” above $750,000, stand in line and expect a lot of competition. Short sales make up 32% of the active inventory and 80% of all distressed sales. WARNING, do not be fooled by the 7.2 month expected market time for short sales. This statistic is extremely deceiving. There is actually tremendous demand for short sales and a majority of all active short sales actually have an offer to purchase that has been accepted by the seller and submitted to the lender. Short sales are “subject to lender approval,” meaning they are not officially a pending sale and officially pulled off the market until formal lender approval. So, about roughly half of the 4,789 currently active short sales have offers submitted to a lender for approval. This process can take anywhere from weeks to months to receive formal lender approval. And, even though the buyer and seller have executed an agreement, that alone does not guarantee that the lender is just going to rubber stamp an approval. The lender will want to be certain that the buyer, seller and property all qualify. The lender will make sure that the buyer is properly approved and able to close on the short sale. The lender will also make sure that the seller is truly a “hardship” case and does not have a savings account, a 401k nor owns other homes. Last, the lender will make sure that the property was not placed on the market at an artificially low level just to attract offers to purchase. In that case, they would be better off foreclosing and marketing the property themselves. Keep in mind that a majority of our market is controlled by lenders who are not emotionally involved and will approach these homes as assets and not homes. They work in the Asset Management Department and have computer programs and spreadsheets that control their decisions.

If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Market Time Report: Demand Surges as the Inventory Drops

2008-06-17T15:16:00.000-07:00

June 12, 2008

From day one of 2008, demand has improved week after week unabated. This week it surged and the inventory dropped as a result. Demand, the number of new pending sales over the prior month, grew by an additional 390 homes in the past two weeks to 3,060. Demand has not been at this level since September of 2005. That date is significant because it was the end of the nine year housing run. The Autumn of 2005 was the beginning of the end for the long run-up in Orange County housing. One year ago today, there were 1,075 fewer pending sales, totaling only 1,985. Current demand is 54% better than last year. Two years ago there were 548 fewer pending sales. We have not experienced demand at this level in 33 months. This year’s demand has broken from traditional cycles and has continually increased. The total pending count has increased substantially as well, growing from a low of 1,456 pending sales at the beginning of the year to 4,256 today.

The other half of the story is that the active inventory has dropped below the 15,000 mark for the first time since the beginning of January. Over the past two weeks the Orange County active inventory has dropped by 390 homes to 14,880. Over the past month the inventory has dropped by 577 homes. The last time I reported inventory below 14,880 dates back to April 19 of last year. There’s a big difference between last year and this year though. In 2007, the inventory grew from 11,643 homes at the beginning of January to its peak in September of 17,898 homes. From April 19, 2007, to June 14, 2007, the inventory grew by more than 2,000 homes. Just like demand, the active inventory has broken away from the traditional real estate cycle. Even in a hot seller’s market, the active inventory tends to grow beginning in the Spring and peaking in the Autumn. The big difference this year is that many homeowners do not want to market their homes and compete with the volume of short sales, sellers who owe more than their homes are worth, and foreclosures. It is difficult to compete with distressed sellers and the unemotional banks that currently control our market. The general public is acutely aware that it is a buyer’s market and that it takes a lot of time and patience to sell. So, sellers were not hastily placing their homes on the market in anticipation of an incredible Spring. I was expecting the inventory to grow to 20,000 homes, but I simply did not factor that the public would perceptively refrain from marketing their homes without proper motivation.

Where is all of this demand coming from? I am unaware of any forecasts that called for demand to increase unabated. The continuous newspaper and televised news reports have described a desperate and bleak real estate market. There are also countless real estate blogs that are so extremely negative, they implicitly seem to be cheering for the “sky to fall.” Yet, demand has blossomed. Therefore, we know that buyers in today’s market did not make their decisions based upon any economic forecasts, media reports or Internet blogs. The general public, once again, exceeded my expectations tremendously. Based upon where we started at the beginning of the year, less than 1,000 pending sales, I personally did not expect demand to increase beyond the 2,000 mark. Instead, it just surpassed the 3,000 mark. Once again, I simply did not factor that the public would perceptively see the real value in today’s marketplace. We know that there are no cheerleaders on the sidelines encouraging buyers to buy. The naysayer would argue that the real estate industry and the agents out in the field may be pushing buyers along. That simply is not the case. Instead, prices have come down significantly because of distressed properties, sellers that absolutely have to sell regardless of the market. Also, affordability has improved dramatically. The increase in the FHA and conventional loan limits to $729,750 has improved financing. Ultimately, these factors have fueled the current wave of first time homebuyer activity. Many first time homebuyers have been priced out of the market for years. The current market has paved their way to homeownership. Many prognosticators mistakenly attempt to treat housing simply as a commodity and attempt to diagnose and forecast based upon numbers and lines. Yet, there is something deeper to consider, a place we affectionately refer to as “home.” Not somebody else’s home, your very own home. There is an inherent desire for homeownership. It is an emotional attachment that goes beyond the data.

What other trends can be discerned from the current data? As a result of the increase in demand and the decrease in the active inventory, the expected market time has dropped significantly from 5.82 months two week ago to 4.86 months today. This is the first time in 16-months that the market time has dropped below the five month mark. Last year, the expected market time was at 8.5 months. Two years ago, it was at 5.68 months. The sold data is just now surpassing year over year levels. Last year, there were 2,081 sales in the prior 30-day period compared to 2,300 today. In July, all media outlets will be reporting that this month’s sales will be better than last year. That is an incredible lag compared to what is going on in the market today. Two years ago, there were 2,899 closed sales. 39.6% of the current active inventory and 48.8% of demand is either a short sale or a foreclosure. The non-distressed conventional home seller is still a larger portion of demand. These are sellers that are carefully approaching the market with proper motivation, patience and market knowledge. Many are successful because the pride in their homes show in their superior condition and upgrades compared to the distressed homes that they are competing with. Superior condition and a competitive price in the marketplace is a recipe for success. 78% of all distressed homes are priced below $500,000 and 94% are below $750,000. There just are not as many distressed “deals” in the upper ranges, as many buyers in the marketplace would attest to. Due to the financial crunch, the interest rates and lender requirements for super jumbo loans, loans above $729,750, has really negatively affected demand in the upper ranges. Demand for homes above $750,000 is off by 27% compared to last year. With homeowners intuitively keeping their homes off the market, the current active inventory of homes in the upper ranges is also off by 23% compared to last year. The surge in demand is really isolated to homes below $500,000, where demand is up 233% compared to last year and yet the active inventory is up only 57%. The expected market time is 4.05 months compared to 8.58 months last year. For homes between $500,000 and $750,000, demand is up only 2% compared to last year; however, the active inventory is down by 51%. The expected market time is 4.14 months compared to 8.63 months last year. Not until liquidity is restored and the financial crunch eases will demand for homes in the upper price ranges increase. Currently, there are only slight signs of improvement. It is going to take the better part of the rest of this year for conditions to improve for the upper tier. In the lower ranges, due to the nature of distressed homes, there will still be pressure in pricing. However, with demand rising and so many multiple offers, the drop in pricing will not be as steep as it has been over the last 12-months.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Market Time Report: Stronger Demand Now Exceeds 2007 AND 2006 Levels

2008-06-03T11:53:00.000-07:00

Current Orange County housing demand not only obliterates 2007 levels, but it now has surpassed 2006 levels as well. Demand has reached a mark not seen in 24 months. Thus far this year, it has charted a course that is not at all cyclical and has improved unabated. The most rational reason for this break in tradition is pent up demand, specifically, pent up first time home buyer demand. It is important to reiterate from prior reports: locally, statewide and nationally, everybody seems to be fixated on SOLD data versus what is going on right NOW within the housing market, PENDING data. Why you may ask? Because SOLD data is so readily available and is actually public record. PENDING data is much harder to gauge and very few consistently report it because the data is not publicly available. The SOLD data set’s biggest flaw is that it tells a story about the real estate market about two months ago. I compare it to looking in your rearview mirror. It does a great job of letting you know where you have been, but it is not a very good gauge in letting you know what is just around the corner. I would not want to drive my car solely looking through the rearview mirror. Sold data is helpful in comparing where we have been compared to prior months or years, but is NOT a leading indicator that points to where we are going from here. PENDING data, on the other hand, gives us the ability to navigate looking out the front windshield. There may be curves and mountains to climb or descend down the road, but at least I can tell you where I am going right NOW. A lot can change in two months too. For example, current demand, the number of homes placed into escrow within the prior month, is at 2,720 homes versus 2,285 two months ago, a 19% improvement. The prior two month period experienced a 46% improvement. Current sold home levels surpassed 2007 levels for the first time starting just two weeks ago, whereas demand beat year over year levels a little over two months ago. So, expect the media to report that June SOLD data surpassed 2007 levels in the middle of July.

The storyline really has not changed much this year: demand is continuing to grow; the active inventory has changed very little this year; and expected market time has dropped like a rock. The current active inventory dropped by 187 homes in the past two weeks to 15,270 homes. Thus far, the 2008 height in the active inventory was achieved on March 20th, 15,617 homes. The inventory was at 14,944 homes on January 11th. Not much of a change. In comparison, last year’s inventory grew from 11,643 homes in the middle of January to 16,500 a year ago from today, a 42% increase compared to a 2% increase this year. Current demand is at 2,720 escrows versus 1,862 escrows last year and 2,618 escrows two years ago. Thus far this year demand has improved by 173%. The current expected market time is presently at 5.61 months versus 8.86 months just one year ago and 5.16 months two years ago. Market time has not yet surpassed 2006 levels because the active inventory was at 13,502 homes two years ago. However, the active inventory was rapidly growing two years ago and reached the 15,000 mark at the beginning of July. If current demand continues to improve and the inventory remains steady or drops, the expected market time will continue to improve.

What other trends can be discerned from the current data? First things first, a lion’s share of demand is relegated to the lower end. Demand in the lower ranges, below $500,000, is up 203% compared to last year and the listing inventory in this range is up just 66%. For homes between $500,000 and $750,000, demand is down by only 8% and the inventory is down by 47% compared to last year. In the upper ranges, from $750,000 and above, demand is off by 27% compared to last year and the inventory is down by 21%. This shift in demand has everything to do with the continued problems stemming from the financial crunch in obtaining financing above $729,750, the current conventional loan limit. It also has a lot to do with the current wave of first time home buyer activity fueled by the distressed properties, a significant drop in prices and an increase in affordability. This shift in demand has changed the mix of SOLD data significantly. This shows up in the overly hyped “median sales price.” The median value is when you line up a list of all of the SOLD values from least to greatest and then take the exact middle value, which becomes the often reported “median sales price.” Yes, prices have come down, probably more along the scale of 12% year over year for the county as a whole, BUT they have not come down 20.5% year over year as reported in April’s median sales price. There is a much better, more sophisticated calculation undertaken by the Office of Federal Housing Enterprise Oversight, OFHEO, which tracks repeat sales. Unfortunately the OFHEO takes a back seat to the median sales price. After the first quarter of 2008, they have the drop in pricing pegged at 11.16%. The OFHEO scrutinizes recent conventional loan activity; thus, some argue that if it included the upper range, that the drop would be even larger because of the lingering effects of the financial crunch. I disagree. The upper ranges are dropping in value; however, most of the distressed activity has been isolated to the lower ranges. Only 7% of the 5,909 current distressed homes on the market, foreclosures and short sales, can be found above $750,000. There are only 431 out of the 4,907 homes currently on the market above $750,000 that are distressed. Prior to the significant entry of distressed properties last year, there was a tug of war between buyers and sellers and values were really not decreasing by much. Once you throw in homeowners and banks that absolutely, unequivocally have to sell, price becomes the motivating factor to procure a sale. Currently, 62.4% of all homes below $500,000 are either a foreclosure or short sale. Don’t jump to any conclusions that prices will continue to drop like a rock in this range. This is the range that has witnessed the sharpest increase in demand. Demand within this range has grown from 917 homes just three months ago to 1,579, a 28% increase, while the inventory has only grown by 8%. From the beginning of the year, demand has jumped 305% for homes below $500,000 and the inventory has only grown by 19%. The expected market time has actually dropped to 4.6 months for this range, a slight seller’s market reading. Let’s not get ahead of ourselves, the nature of distressed properties puts pressure on pricing because of the enormous quantity in the current market. Thus, expect prices to continue to drop, just not at the same rate the prior nine months.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Danawoods pool home!

2008-05-27T14:44:00.000-07:00

This beautiful home offers 4 bedrooms and 3.5 baths. Situated at the end of a cul-de-sac with views through the canyon down to the ocean. Updated throughout this home offers a master bedroom on the lower level as well as the upper level. Serene back yard with private pool and spa.
$959,000
For a private showing call us at 949-300-1600.
www.mcgarvingroup.com

Market Time Report: Demand Far Exceeds 2007 Levels

2008-05-20T09:31:00.000-07:00

Demand is not only dramatically surpassing 2007 levels, it is just shy of matching 2006 levels. The big difference in comparing current demand to demand over the past two years is that it has been improving unabated throughout 2008. This is so contrary to the constant stream of negative news regarding the housing market. That is due to the fact that the media is only provided with SOLD data, which is a snapshot of demand a couple of months ago. As a matter of fact, Dataquick, the company that provides the statistical SOLD and median price data to the media, is going to release the figures for April next week. Orange County housing demand did not exceed last year’s demand until the beginning of April, which will not reflect in the SOLD data until May’s data at the earliest. With that in mind, expect next week’s sold data to fall short of exceeding last year’s levels. The disparity will be closer than last month’s comparison, but it will still fall short. This is not due to escrows falling apart; it is because in March of this year there were fewer homes placed into escrow compared to March in 2007. So, it is a matter of time before the data that the media is supplied catches up to the story of today: demand is much stronger than last year. Demand, a snapshot of the prior 30 days of escrow activity, has continued its ascent by adding an additional 118 escrows in the past two weeks, bringing the current total to 2,658. Just last year demand was at 2,010 escrows, 648 fewer than today, off by 26%. Two years ago demand was at 2,741 escrows, 83 additional compared to today, or 3% more.
“Steady as she goes” is this best way to sum up the current active inventory. After the active inventory dropped by 604 homes on January 1, 2008, a normal, cyclical phenomena, from 15,328 to 14,724, since reaching 15,363 on January 30th, the inventory has only grown by an additional 94 homes, or six-tenths of one percent. That does not mean that only 94 homes have come on the market within in that time period; instead, it means there are almost an equal number of homes coming on the market as there are coming off. During the same period of time last year, the active inventory grew by 4,193 homes, or 35%. In 2006, it grew by 4,628, or 57%. The current active inventory is now at 15,457 homes, 20 additional homes compared to two weeks ago. Last year, there were 631 additional homes and climbing at a steady rate. Two years ago there were 2,761 fewer homes on the market; however, if it continues along its current, persistent trajectory, the inventory will be less than the 2006 mark by the end of July of this year.
With steadily increasing demand and a stable active inventory, the expected market time has continued its 2008 descent. Starting the year at 15.6 months, the market time has dropped significantly to 5.82 months today. This is the first drop below the six month mark in 14 months. Last year at this time the market time was at 8.0 months and two years ago it was at 4.63 months. As can be seen below, the expected market time is not following any trends of the prior two years other than the initial beginning of the year drop. If demand continues to improve and the inventory remains steady, the market time can continue to improve.
What other trends can be discerned from the current data? First, it is safe to say that the current market is much different than the past two years. There is tremendous activity for all homes below $500,000. This range now accounts for 47% of the current active inventory and 58% of demand. Last year, this range accounted for only 26% of both the active inventory and demand. Foreclosures only account for 7% of the current active inventory, totaling only 1,082, but they account for 25% of current demand. The expected market time for foreclosures has dropped to 1.61 months, a deep sellers market. Thus, it makes sense that foreclosures are not only fetching multiple offers, many are selling for above their asking prices. Short sales, where the homeowner owes more than the current market value of their home, total 29.7% of the current active market, 4,596 homes, but only 19% of demand. The expected market time is 8.94 months. HOWEVER, these statistics are extremely misleading as most buyers and all agents can attest to. A large portion of these active listings already have secured an acceptable offer, and in many cases, multiple offers, signed by both the buyer and seller and submitted to the bank, or banks, because they are “subject to lender approval.” Yet, they remain on the market as active listings. This is permissible as long as there is a signed “short sale agreement” that allows the seller to continue to actively market their home until formal lender approval occurs. The reports from the streets are that close to 50% of all short sale listings have mutually signed offers that are in the lenders hands for their approval process. This process can take anywhere from a few weeks to months. With 77% of all short sales below $500,000, demand is under stated. So, there is a boat load of activity in the lower ranges in Orange County. The bottom line is this: short sales and foreclosures have enabled housing prices to drop substantially since demand peaked in the first half of 2006. At the beginning of the current cycle there was a stalemate where buyers did not want to buy and sellers did not want to come off of their pricing perches. But, with the implosion of the subprime market and, subsequently, the financial market and lending liquidity, the housing landscape changed significantly. The housing boom had been underwritten by adjustable, subprime loans that began to rapidly reset in the second half of 2007. An unprecedented number of homeowners defaulted on their loans. This trend will continue until the end of 2008 when subprime loan resets will significantly diminish. Currently, 36.7% of the active inventory is either a foreclosure or short sale. Demand increased considerably as prices dropped to levels not seen in years. We are currently experiencing a wave of first time home buyer activity. Almost every Realtor® is working with a first time home buyer. Two years ago nobody was working with a first time home buyer and parents were wondering if their children would ever be able to afford a home in Orange County. First time home buyers have been priced out of the market for years and now that affordability has greatly improved, demand has skyrocketed. The new FHA loan limit of $729,750, allowing buyers with some credit issues who can afford the payment to put as little as 3% down, has helped fuel demand in the lower ranges as well.
Where’s the demand in the upper ranges? Finally we are seeing a bit of relief from the affects of the financial market. The disparity between the old $417,000 conventional loan limit and the new $729,750 limit has dropped from three-quarters of a percent to one-eighth. That is a major shift in financing which should increase demand up to the $800,000 level. The disparity between the old conventional loan limit and the new super jumbo loan limit, loans above $729,750, has improved from 1.5% down to 1%. These disparities should continue to improve as the year progresses, and should reach much more comfortable levels by the end of the Summer. So, demand in the upper ranges should slowly improve as liquidity is slowly restored this year. Also, there was a six month lag between the slowdown of the lower and upper ranges in 2007. It stands to reason that a similar lag would apply in the improvement in demand. Demand in the lower ranges really did not surge until the end of February. That would place an increase in demand for upper ranges at the end of August.

If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

Market Time Report: The First Time Wave is Growing

2008-05-05T15:18:00.000-07:00

Compared to last year, demand is stronger, there are fewer homes on the market and the expected market time is much lower. The first time home buyer wave continues to grow and plant the seeds to an eventual recovery. The reports from the streets of Orange County are unanimous: first time home buyers are fueling a surge in activity that continues to flourish and has been steadily growing since the middle of February. Multiple offers in the lower ranges, homes priced below $500,000, are now quite common throughout Orange County. This chart illustrates how demand has not only surged past the 2007 level, but is quickly approaching the 2006 level. Until just four weeks ago, year over year demand had not been stronger than the prior year since September 2005, the beginning signs of the current slow cycle. Demand, a snapshot of the prior 30 days of escrow activity, has climbed by an additional 166 escrows in the past two weeks to 2,540. Last year at this time, demand was at 1,863 escrows, 677 fewer than today. Two years ago it was at 2,701, or 161 additional escrows.

The active listing inventory has remained steady in 2008. In the prior two weeks, the active inventory has dropped by 119 homes to 15,437. We started the year with 14,724 homes, 713 fewer than today, but that was after shedding 1,050 homes in December 2007 with sellers pulling their homes off the market for the holidays. Still, that only represents a 5% increase so far this year compared to a 37% increase in the inventory last year. Two years ago there were 3,481 fewer homes on the market; however, the inventory was growing at an extremely rapid rate in 2006. The inventory had already increased by 65% to this point and it continued to grow by another 34% until reaching its peak of 16,006 homes back in August 2006. Today, the active inventory has steadily remained just under 16,000 homes and appears as if it will continue along that path.

With steadily increasing demand and a stable active inventory, the expected market time has dropped like a rock. Starting this year with a market time of 15.6 months, a deep buyers market, the market time has improved to its lowest mark of the year to date at 6.08 months, a 61% drop. Last year the market time was at 8.33 months and climbing at an alarming rate that would spook any buyer considering purchasing. Two years ago the market time was at 4.43 months and climbing. By the end of June 2006, the market time had blossomed to 6.33 months.

So, it is safe to say that the Orange County housing market has definitely changed gears this year. The lower ranges and the flood of first time buyers are entirely responsible for this change. What changed? The answer is quite simple: the significant drop in prices has allowed buyers that have been sitting on the fence to finally afford to buy once again. After being priced out of the market with rampant appreciation earlier this decade, affordability is finally improving and inviting buyers that have been waiting a long time to finally purchase. Properties priced below $500,000 account for 47% of the entire active inventory and 56% of demand. Last year, this same range accounted for only 26% of the active inventory and demand. Detached homes below $750,000 are actually experiencing a slight sellers market, below the five month mark. The volume of distressed homes in the lower ranges has provided the fuel for the decline in pricing. 77% of all distressed properties are priced below $500,000 and 94% are priced below $750,000. Short sales and foreclosures now make up 36% of the current active inventory versus 35% two weeks ago. There are now 5,576 distressed properties on the market. The overwhelming majority, 81%, are short sales, sellers with loan balances that exceed the current market value and are “subject to lender approval.” For short sales, there are currently 4,504 active listings and demand is at 544 escrows. The expected market time is at 8.28 months, dropping from 9.86 months two weeks ago. But, this statistic is extremely misleading, just ask a buyer searching for a home. A large portion of the 4,504 active listings already have secured an offer on the property signed by both the buyer and seller, yet they remain active on the market. The reason is that there is also a signed short sale agreement that allows the seller to continue to actively market their home until formal lender approval occurs. This process takes anywhere from a couple of weeks to months. Unfortunately, there is no way of knowing which short sale listings already have an agreed upon offer submitted to the bank other than contacting the listing agent directly for their verbal answer. So, true demand in Orange County is actually understated. The word on the street is that close to 50% of all active short sale listings already have an agreed upon offer submitted to the lender. If those were to be truly changed to “pending escrow” status, the demand count would increase considerably, the inventory would drop and the market time would drop as well. Unfortunately, not all short sales with offers submitted for lender approval are actually approved. Roughly 1 out of 3 are accepted. Many are rejected because they are priced too far under their true market value. With increased demand comes more realistic pricing of short sales. As this year progresses, expect the lender acceptance rate to grow closer to 1 out of 2.

Where’s the demand in the upper ranges? The financial crunch is still impacting liquidity in the upper ranges. Demand is off by more than 30% compared to last year for all homes priced above $750,000. Remember, the conventional loan limit and FHA loan limit were both just raised to $729,750. However, there are now three tiers of loan rates: the old conventional loan limit up to $417,000, $417,001 up to the new limit of $729,750 and then $729,751 on up. The original intent was to expand the lower interest rates of conventional loans to higher ranges in areas with much higher prices, like Orange County. Historically, major changes in federally backed loan programs were carefully put together for the better part of a year. This time, the financial industry was given about a month to create and implement a significant change. The credit markets are just now adapting to the new loans. Part of that adaptation is the three tier system. Until the entire secondary market becomes more comfortable with these changes, the discrepancy in interest rates between each tier will be sizeable. There is about a three-quarter point differentiation between each tier. As the market adapts to the new program and liquidity is restored in the financial markets with investors once again purchasing pools of loans, the discrepancy between the tiers will shrink to about a quarter of a point. The experts are predicting that there will be considerable improvement by the end of the third quarter of this year, by the end of the summer. Currently, for loans above $729,750, the interest rates, loan qualifications and down payment requirements are extreme barriers to entry. That does not bode well for homes priced above $800,000, where the rate is approximately 1.5% above the $417,000 rate. This has impacted the upper range dramatically. All ranges above $1 million are experiencing market times above ten months; the higher the range, the higher the expected market time. Not surprisingly, the areas in Orange County that are impacted with market times above ten months are Corona Del Mar, Coto de Caza, Laguna Beach, Newport Beach and Newport Coast. These areas should all improve by the end of the summer with improvements in the financial markets.

With demand off in the upper ranges by more than 30%, do not be surprised when the media reports a significant year over year drop in the median sales price. With the lower ranges hot and the upper ranges not, the median value will be much lower. The average pending sales price a year ago was at $869,000 compared to $605,000 today. This is partially due to the decline in prices, but it also has a lot to do with a major decline in demand in the upper ranges. For the first three quarters of 2007, prior to the beginning of the financial crunch, the number of sales above $1 million in all of California was only off by 3% compared to the prior year. For homes below $1 million, sales were off by almost 30%. A month after the start of the financial crunch, September of 2007, sales above $1 million were down 26% compared to the prior year. The upper ranges have been impacted ever since. As liquidity is restored in the upper ranges, do not be surprised by an increase in demand in the upper ranges and an increase in the median sales price.

If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/

There is actually an appetite from the media for good news from the housing front

2008-04-25T12:44:00.000-07:00

Prior to the Orange County Register article running on Tuesday signaling year over year demand was way up (directly from the Market Time Report), the story was posted on the OCRegister.com website on Monday. From the story on their website on Monday, I received a call from KABC Channel 7 News and a TV van was parked in our lot by 1 pm taping a story about the wave of first time home buyers to be aired at 5 pm. I also received a call from Vikki Vargas and she had questions about the first time home buyer wave for a story they were doing from the article on the KNBC Channel 4 News at 5 pm. I also received a call from KNX1070 news radio and was interviewed by Jim Thorton and Diane Thompson regarding the increased demand and wave of first timers for the afternoon drive. To cap off the day, I was interviewed by the Wall Street Journal regarding a story that they were doing about first time buyers. Needless to say, for a couple of days this week, there was good news regarding the real estate market here in Orange County. The stories have quickly changed since then to the number of foreclosures during the first quarter in the Southland, but Monday illustrates that the media is tiring from all of the negative news. By the way, I have a slew of great emails from all of the news agencies and I will be sending them the Market Time Report as well. Below is the link to the story that caused all of the commotion. Click on the following link to view “Homebuying demand jumps 23%, expert says”: http://www.OurAgentSpot.com/sthomas/RegisterApr22.pdf.
Steven ThomasRE/MAX Real Estate Services"Outstanding Agents! Outstanding Results!"Office

Market Time Report: First Time Home Buyers are Back

2008-04-23T13:26:00.001-07:00

Current housing demand continues to outpace last year and the reemergence of first time home buyers is a major factor. If you listen to or read all the recent reports regarding “sold” statistics for March, one would quickly come to the conclusion that the real estate market is continuing to sputter along at a slow pace. However, this could not be further from the truth. Sold activity is a snapshot of the past, about a month and a half in the past to be precise. So, March “sold” statistics are really a snapshot of the second half of January through the first half of February. The market did improve during that time but was still extremely anemic as demand, a snapshot of the prior 30 days of escrow activity, grew from 989 escrows in mid-January to 1,630 escrows in mid-February, a gain of 641 escrows. Since then demand has continuously grown to its current height of 2,374 escrows. Last year at this time demand was at 1,925 escrows, 449 fewer than today. This recent escrow activity will translate to sold data reported in the months to come. The big story will be that the year over year sold statistics will be better for the first time since the Autumn of 2005. Demand already crossed that threshold two weeks ago. Some skeptics attempt to discount the uptick in demand, claiming that many will fall out of escrow. That is simply not statistically true. The data does not support their claim. Yes, some escrows do fall out; however, the snapshot of 30 day escrow activity misses some escrows that have already closed because they were less than 30 day escrows. The average escrow is about 45 days, but we do have one, two and three week escrows that won’t show up in the data for long. So, the less than 30 day escrows offset most escrows that fall out. The bottom line: the market is improving. Market time has dropped from 15.6 months at the beginning of the year to 6.55 months today, not as deep of a buyer’s market. The active inventory grew by only 82 homes in the past two weeks to 15,556 homes. The active inventory has not changed much this year and has actually dropped by 61 homes over the past month. Last year at this time the active inventory was only 745 homes fewer homes than today and it was growing at a rate of 700 homes every two weeks.

The majority of the upswing in demand is in the lower ranges. Our agents in the trenches are unanimously reporting that there is a large wave of first time home buyer activity. First time home buyers had been priced out of the market and dwindled in numbers during the last couple years of the housing boom. But, prices have finally fallen to a point where they can now afford to purchase and that is precisely what they are doing. One year ago there were only 408 condominiums priced below $250,000 compared to 1,263 today, more than triple. One year ago there were only 343 detached homes priced below $500,000 compared to 2,848 today, more than eight times. The market time for detached homes below $500,000 is at 4.61 months, a slight seller’s market. It is not a coincidence that 75.7% of all condominiums and detached homes below $500,000 are either a foreclosure or a short sale. This fact has provided many opportunities for first time home buyers to finally enter the market. The first time home buyer activity is the seeds to the rebirth of the Orange County housing market. That does not mean that the market is going to right itself overnight. But, it is the first positive step in the recovery process. It was the lower ranges that were hit hard last March with the beginning of the subprime meltdown and it makes sense that it would be the first to take a step in the right direction. Many homes and condominiums in the lower ranges are receiving multiple offers. Foreclosures and short sales are not only securing multiple offers, they are closing above their asking price.

The upper ranges remain sluggish due to the financial crunch. The financial system is still not functioning properly. Lenders are still having liquidity issues and their lending requirements and interest rates for loans in the upper ranges are too rigid and are deeply cutting into demand. For example, the market time for homes priced between $1 million and $1.5 million is 10.89 months compared to 7.47 months one year ago. The upper ranges will remain sluggish until the financial markets start buying pools of mortgages once again. Since the beginning of the financial crunch in August of 2007, the financial markets have refused to buy any pools of mortgages. But, there are some signs that their appetite has been growing. First, a major national lender attempted to sell a pool of only the best of the best loans at the end of January, but the financial markets would only purchase them for a discount. They repeated their effort in March and the financial markets bought it at “par.” The logjam in the financial markets should begin to ease by the end of the third quarter, as will the disparity between conventional loans up to $417,000 and the new loan limit of $729,750, as well as jumbo loans above $729,750. Currently, there are three tiers of mortgages. The cheapest rates are for loans below the old conventional loan limit of $417,000. Rates for loans between the old conventional limit and the new $729,750 limit are three-quarters of a point higher. And, lenders tack on an additional three quarters of a point for loans above the new limit. As the financial markets’ appetite for pools of loans increases, these disparities will begin to diminish. This will be the second big positive step towards recovery. At that point, demand at the upper end of the Orange County real estate market will increase.

Buyers, what to do? First, it totally depends upon the area and price range on the approach. Naturally, in dealing with foreclosures, short sales and the lower ranges, be prepared for much more competition than any headlines would lead you to believe. There is a strong probability that you will be competing with other buyers in writing an offer on a home. In some cases it will take an offer to purchase above the asking price to secure a home. Due to the sluggishness in the upper ranges, buyers are more in control of their destiny with less competition. For those buyers looking for a deal in the higher ranges, keep in mind that only 5.7% of all distressed homes, foreclosures and short sales, are found above $750,000. Be prepared for increased activity on these properties too because every buyer is looking for a “deal.” Also, it is important to point out that lenders are in the driver’s seat when it comes to foreclosures. Currently, the market time for foreclosures is 2.05 months, a deep seller’s market. It is important to point out that the low interest rates should remain intact throughout 2008, but pressure is mounting for the Federal Reserve to raise rates as they grow more concerned about an increase in inflation. Rates have been favorable for a long time, but do not get comfortable with today’s interest rates, they WILL eventually increase. As soon as the economy starts humming along again, expect the Federal Reserve to reverse course and push rates up higher. By the way, for every 1% that interest rates increase, it erases approximately all of the benefits of waiting for property values to decrease 10%. The payments are virtually identical.

Sellers, what to do? It is extremely difficult to navigate in the current Orange County real estate market. Now more than ever it is essential to have an experienced Realtor® guide you throughout the process. There are numerous variables and market changes to continuously watch for: area short sales, foreclosures, local trends, detached versus attached pricing, etc. Be prepared to constantly reevaluate your pricing position within the market. The key ingredients to a successful sale are an excellent price and excellent condition. In arriving at price, the condition and location increase or decrease the market value. This market can also test a seller’s patience and you must be as prepared for a showing on day 120 as you were the first week. Stage your home for success: turn all the lights on, have soft music playing in the background, open all of the shutters and blinds to allow in natural light, turn on the air conditioning on hot days, box up and store all clutter and your home should be neat as a pin from top to bottom.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/